Bankrupt crypto lender Celsius Network reached two agreements that allow it to return assets to customers and end bankruptcy proceedings, according to court filings on July 20.
The settlements will be reviewed by Judge Martin Glenn at a hearing on August 10 and will address $78.2 billion in unsecured claims. Any answers and objections must be submitted to the court by August 3.
One of the agreements resolves allegations of fraud and misrepresentation by Celsius management by increasing customer recoveries by 5%. Account holders may still retain rights to pursue individual claims against Celsius if they choose not to be charged. According to court documents:
“Each Eligible Account Holder who does not opt out of settlement will receive a claim in the amount of 105% of its Scheduled Claim, which will supersede and extinguish any Proof of Claim submitted by the Account Holder.”
The second solution provides a solution for customers with interest-bearing funds of Celsius. Under the proposed deal, customers who have borrowed crypto funds will be able to receive a portion of their funds in crypto assets, along with a compensation in shares of the new company that emerges from the bankruptcy proceedings.
“[…] creditors have agreed to support an amended plan that will provide deposit claim holders of retail borrowers (a) the option to pay off their principal loan balance […] in exchange for an equivalent amount of cryptocurrency (which may lead to tax benefits for such holders compared to Setoff Treatment) and (b) priority in electing a preference to exchange New Venture Capital for liquid cryptocurrency at a 30% discount. […]”, the document states.
Celsius filed for Chapter 11 bankruptcy in July 2022 after announcing a pause in all withdrawals amid market turmoil stemming from the collapse of the Terra ecosystem. A year later, on July 13, 2023, its former CEO, Alex Mashinsky, was arrested on 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 raising “billions of dollars” through unregistered and fraudulent offerings, as well as selling “crypto-asset securities.” The Federal Trade Commission also announced civil cases against the former CEO and issued $4.7 billion in fines to the lending platform for alleged “abuse[ing] billions in user deposits” after “cheating” users.
Magazine: How Smart People Invest in Dumb Memecoins — 3-Point Plan for Success