Celsius Network, a crypto lending platform that had previously filed for bankruptcy, has managed to arrange two settlements that could enable the return of assets to its clients and bring an end to its bankruptcy proceedings, as per the court filings on July 20.
These settlements, addressing $78.2 billion in unsecured claims, are set to be reviewed by Judge Martin Glenn in a hearing scheduled for August 10. All responses or objections to these settlements are required to be submitted to the court by August 3.
The first agreement aims to resolve claims associated with allegations of fraud and misrepresentation by the management of Celsius. It proposes to enhance recoveries for customers by 5%. Account holders will maintain the right to pursue individual claims against Celsius if they choose to opt out of the settlement. 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 offers a solution for customers with funds in Celsius’ interest-bearing Earn product. As per the proposed agreement, customers who borrowed crypto funds will have the option to receive a portion of their funds in crypto assets, along with compensation in shares of the new company that will emerge from the bankruptcy proceedings.
“[…] creditors have agreed to support an amended Plan that will provide Holders of Retail Borrower Deposit Claims with (a) the option to repay the their principal balance of their loan […] in exchange for an equivalent amount of cryptocurrency (which could lead to tax benefits for such Holders as compared to the Setoff Treatment) and (b) priority in electing a preference to exchange the NewCo Equity for Liquid Cryptocurrency at a 30% discount […],” the document reads.
Celsius Network filed for Chapter 11 bankruptcy in July 2022 after announcing a pause in all withdrawals amid market turbulence caused by the collapse of the Terra ecosystem. A year later, in July 2023, its former CEO, Alex Mashinsky, was arrested on criminal and civil charges of fraud and market manipulation, to which he pleaded not guilty.
On the same day, the Securities and Exchange Commission filed a lawsuit against Mashinsky and other Celsius executives for allegedly raising “billions of dollars” through unregistered and fraudulent offers, as well as selling “crypto asset securities.” The Federal Trade Commission also announced civil cases against the former CEO and imposed $4.7 billion in fines on the lending platform for allegedly “squander[ing] billions in user deposits” after “duping” users.
