Bankrupt crypto lender Celsius Network has reached two settlements that will enable the return of assets to customers and bring an end to the company’s bankruptcy proceedings, according to court filings on July 20th. These settlements, totaling $78.2 billion in unsecured claims, will be reviewed by Judge Martin Glenn during a hearing scheduled for August 10th. Any responses or objections to the settlements must be submitted to the court by August 3rd.
The first agreement addresses allegations of fraud and misrepresentation by Celsius management. It increases customers’ recoveries by 5% and allows account holders to retain the right to pursue individual claims against Celsius if they choose to opt out of the settlement. According to court documents, eligible account holders who do not opt out will receive a claim worth 105% of their scheduled claim, which will supersede any related proofs of claim previously filed.
The second settlement provides a resolution for customers with funds in Celsius’ interest-bearing Earn platform. Under this proposed agreement, customers who borrowed crypto funds will be able to receive a portion of their funds in crypto assets. Additionally, they will receive compensation in shares of the new company emerging from the bankruptcy proceedings.
The court documents state that creditors have agreed to support an amended plan that offers holders of retail borrower deposit claims the option to repay the principal balance of their loan in exchange for an equivalent amount of cryptocurrency. This option could potentially provide tax benefits for the holders compared to the setoff treatment. The document also mentions that these holders will have priority in electing a preference to exchange the equity of the new company for liquid cryptocurrency at a 30% discount.
Celsius initially filed for Chapter 11 bankruptcy in July 2022, following a suspension of all withdrawals due to market turbulence resulting from the collapse of the Terra ecosystem. A year later, on July 13, 2023, the company’s former CEO, Alex Mashinsky, was arrested on criminal and civil charges of fraud and market manipulation. Mashinsky pleaded not guilty to all charges. On the same day, the Securities and Exchange Commission filed a lawsuit against Mashinsky and other Celsius executives, accusing them of raising billions of dollars through unregistered and fraudulent offers and selling crypto asset securities. The Federal Trade Commission also announced civil cases against Mashinsky and issued $4.7 billion in fines to Celsius for allegedly squandering user deposits and deceiving users.
The upcoming hearing on August 10th will determine the approval of the settlements reached by Celsius Network. If approved, these settlements will allow the return of assets to customers and mark the conclusion of the bankruptcy proceedings for the crypto lender.