Celsius, the bankrupt cryptocurrency lender, has announced that the majority of eligible creditors have now received their liquid cryptocurrency distributions through its two distribution agents: payments giant PayPal and cryptocurrency exchange Coinbase. The update was provided in a recent court filing by Kirkland & Ellis LLP, the legal representation for Celsius, following the company's decision to exit bankruptcy protection, initially filed in July 2022.
According to Kirkland & Ellis, cryptocurrency allocations for U.S. holders are managed through PayPal, while Coinbase serves as the allocation agent for overseas holders. The legal team reported that over $2 billion worth of cryptocurrencies, including 20,255.66 Bitcoin and 301,338.77 Ethereum, have been transferred to creditors. As of the filing date, approximately 75% of the BTC/ETH allocated by PayPal/Venmo and Coinbase has been successfully collected by holders.
However, the court filing noted that creditors who do not agree to the reorganization plan will not receive distributions until their individual claims are resolved. Additionally, challenges may arise for certain account holders if Coinbase or PayPal flag any anti-money laundering (AML) or compliance issues, as distribution agents have the discretion to refuse distributions to those deemed non-compliant.
There has been speculation within the crypto industry regarding how actions in the restructuring plan might impact the broader market. Celsius had begun recalling and rebalancing its crypto assets in early January to facilitate timely distributions to creditors. However, concerns were raised by blockchain analytics firm Nansen, revealing that a significant portion of the ETH in the withdrawal queue belonged to Celsius.
In parallel, former Celsius CEO Alex Mashinsky is scheduled to stand trial in September 2024 over the collapse of the cryptocurrency lender. Mashinsky's legal team, however, has come under scrutiny due to potential conflicts of interest, as they also represent Sam Bankman-Fried, the former CEO of bankrupt cryptocurrency exchange FTX. U.S. prosecutors have expressed concerns about these conflicts, prompting requests for a Curcio hearing to address the matter.
