Cryptocurrency lender Celsius Network, which filed for Chapter 11 bankruptcy protection in July 2022 due to market turmoil caused by the collapse of the Terra ecosystem, has reached two settlements that would allow it to return assets to its clients and end the bankruptcy proceedings. The settlements were filed on July 20, and Judge Martin Glenn will review them and resolve the $78.2 billion in unsecured claims at a hearing on August 10. Any responses and objections to the settlements are due by August 3.
One of the settlements addresses claims brought by Celsius Network's management, involving allegations of fraud and misrepresentation. The settlement increases the compensation for clients by 5%. If an account holder chooses not to accept the settlement, they can still retain the right to pursue individual claims against Celsius. Under the proposed agreement, eligible account holders who do not opt out will receive a claim for 105% of their scheduled claim amount, superseding any related proof of claim submitted by them.
The second settlement focuses on customers who have funds in the Celsius interest-bearing earning program. It allows clients who borrowed funds in cryptocurrencies to receive a portion of their funds in crypto assets and compensation in shares of new companies involved in the bankruptcy proceedings. Creditors have agreed to support this revised scheme, providing retail borrower deposit claim holders with the option to repay the loan principal balance in exchange for an equivalent amount of cryptocurrency and the preferred option to exchange NewCo equity for liquid cryptocurrency at a 30% discount.
Amid the bankruptcy proceedings, the former CEO of Celsius Network, Alex Mashinsky, was arrested on July 13, 2023, on criminal and civil charges of fraud and attempted market manipulation. He has pleaded not guilty to all charges. EC filed a lawsuit against Mashinsky and other Celsius executives, accusing them of raising "billions of dollars" through unregistered fraudulent offers and selling "crypto-asset securities." Additionally, the FTC announced a civil lawsuit against the former CEO and fined the lending platform $4.7 billion for allegedly "wasting billions of dollars in user deposits" after it allegedly "defrauded" users. The settlements reached by Celsius Network aim to address some of the claims and bringcy the bankruptcy proceedings to a close.
