Celsius Network reaches settlements to exit bankruptcy

Bankrupt crypto lender Celsius Network has reached two agreements that allow it to return assets to customers and end its bankruptcy proceedings, According For a court filing on July 20.

The settlements will be analyzed by Judge Martin Glenn at an August 10 hearing and $78.2 billion in unsecured claims will be resolved. Any responses and objections must be submitted to the court by August 3.

One of the agreements resolves claims of fraud and misrepresentation by Celsius management by increasing customer recoveries by 5%. If account holders choose to opt out of the settlement, they may still retain the right to pursue individual claims against Celsius. According to court documents:

“Any Eligible Account Holder who does not opt-out of the Settlement shall receive a Claim in the amount of 105% of his/her Determined Claim, which shall supersede and nullify any related Proof of Claim filed by such Account Holder.”

The second agreement provides a solution for customers who have funds held in Celsius’ interest-bearing income. Under the proposed agreement, customers who have borrowed crypto funds will be able to receive a portion of their funds in crypto assets, along with compensation in shares of the new company that emerges from bankruptcy proceedings.

“(…) the creditors have agreed to support a revised plan that will provide holders of retail borrower deposit claims (a) the option to repay the principal balance of their loan (…) in exchange for an equivalent amount of cryptocurrency (thereby allowing tax benefits for such holders as compared to setoff treatment) and (b) priority in choosing to exchange Nuco equity for liquid cryptocurrency at a 30% discount (…),” the document reads.

Celsius filed for Chapter 11 bankruptcy in July, 2022 after announcing a moratorium on all withdrawals amid market turbulence resulting from the collapse of the Terra ecosystem. A year later on July 13, 2023, its former CEO, Alex Mashinsky, was arrested under criminal and civil charges of fraud and intent to manipulate the market. He pleaded not guilty to all charges.

Also on July 13, the Securities and Exchange Commission filed a lawsuit against Mashinsky and other Celsius executives for selling “crypto asset securities” as well as raising “billions of dollars” through unregistered and fraudulent offerings. The Federal Trade Commission also announced civil cases against the former CEO and issued a $4.7 billion fine on the lending platform for allegedly “wasting billions in user deposits” after “cheating” users.

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