Celsius Network has reached two settlements that may lead to the return of assets to customers and the conclusion of bankruptcy proceedings, addressing $78.2 billion in unsecured claims.
Celsius Network, the once-bankrupted crypto lender, has successfully reached two crucial settlements that promise to restore assets to its customers and bring an end to its lengthy bankruptcy proceedings in a significant development.
Court filings on July 20 revealed the breakthrough agreements, which will now be assessed by Judge Martin Glenn during a scheduled hearing on August 10. These settlements aim to address a staggering $78.2 billion in unsecured claims, marking a potential turning point for the embattled company.
The first settlement confronts allegations of fraud and misrepresentation against Celsius management head-on. Under the terms of this agreement, customers’ recoveries will be increased by an impressive 5%. Notably, account holders who participate in the settlement can still retain the option to pursue individual claims against Celsius if they choose to opt out. As per the court documents:
“Any eligible Account Holder who does not opt out of the Settlement will receive a claim in the amount of 105% of their scheduled claim, which will supersede and extinguish any related Proofs of Claim filed by such Account Holder.”
The second settlement specifically addresses customers who had funds in Celsius’ interest-bearing Earn program. As part of this proposed resolution, those who previously borrowed crypto funds will now have the opportunity to receive a portion of their funds back in the form of crypto assets. Additionally, they will be entitled to compensation in the form of shares in the new company arising from the bankruptcy proceedings.
Noteworthy is the fact that creditors have agreed to support an amended Plan that provides Holders of Retail Borrower Deposit Claims with an intriguing option. They will have the opportunity to repay the principal balance of their loans with an equivalent amount of cryptocurrency. This move could potentially yield tax benefits for the borrowers compared to the Setoff Treatment. Furthermore, these holders will also be granted priority in choosing to exchange the NewCo Equity for Liquid Cryptocurrency at a 30% discount.
Celsius Network filed for Chapter 11 bankruptcy in July 2022 following the suspension of all withdrawals amid the turmoil in the crypto market resulting from the Terra ecosystem’s collapse. However, a year later, on July 13, 2023, the company’s former CEO, Alex Mashinsky, faced criminal and civil charges of fraud and market manipulation. Mashinsky staunchly pleaded not guilty to all charges.
Compounding the company’s troubles, the Securities and Exchange Commission (SEC) filed a lawsuit against Mashinsky and other Celsius executives on July 13. The lawsuit accused them of raising substantial funds through unregistered and fraudulent offers, including the sale of “crypto asset securities.”
The Federal Trade Commission (FTC) also entered the fray, initiating civil cases against the former CEO and imposing fines totaling $4.7 billion on the lending platform. The charges were based on allegations of “squandering billions in user deposits” after allegedly deceiving users.
The cryptocurrency community watches with bated breath to see whether these settlements will be approved as we await the outcome of the upcoming hearing on August 10, allowing Celsius Network to finally exit bankruptcy and potentially regain its standing in the crypto space.