Celsius Network, the cryptocurrency lending platform that recently filed for bankruptcy, has initiated a legal battle against EquitiesFirst Holdings, a lending company, in a bid to recover assets. The complaint, filed on September 6, seeks injunctive relief and a declaratory judgment regarding the "recovery of money/property," as stated in the sealed adversary complaint.
The lawsuit specifically names EquitiesFirst Holdings and its CEO, Alexander Christy, as defendants. Alongside the lawsuit, Celsius Network issued a subpoena on the same day, requiring the private lender to provide a response or motion within 35 days. Reportedly, EquitiesFirst Holdings owed Celsius Network approximately $439 million as of July 2022.
The relationship between Celsius and EquitiesFirst began in 2019 when Celsius sought mortgages from EquitiesFirst to support its operations due to the lack of institutional lending available to cryptocurrency companies at the time. However, in July 2021, Celsius Network attempted to retrieve the collateral it had pledged to EquitiesFirst but was informed that the lender would be unable to return the provided amount.
As of July 2021, EquitiesFirst owed Celsius a total of $509 million, with the loan amount increasing from $439 million to $509 million as it became overcollateralized. Repayment of the debt was structured to occur slowly, starting at a monthly rate of $5 million in September 2021.
By July 2022, EquitiesFirst's debt to Celsius amounted to $439 million, comprised of $361 million in cash and 3,765 Bitcoins. Celsius Network faced significant challenges during the 2022 bear market, ultimately filing for bankruptcy protection under Chapter 11 of the US Bankruptcy Code on July 14 , 2022.
Former Celsius CEO Alex Mashinky was arrested on July 13, 2023, amid accusations of misleading Celsius users and defrauding investors of billions of dollars. Notably, the FTC imposed a fine of $4.7 billion on Celsius for alleged "defrauding" of users, although this judgment was suspended to allow the platform to use the assets as part of its bankruptcy proceedings. Currently, Celsius creditors are in the process of voting on a settlement plan. If approved, this plan would involve a consortium known as Fahrenheit acquiring Celsius assets and subsequently returning the funds to Celsius creditors by establishing a new company.
