Bankrupt crypto lender Celsius Network reached two agreements that allow it to return assets to clients and end its bankruptcy proceedings, according to court documents 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. All responses and objections must be filed with the court by August 3.
One of the settlements resolves claims for allegations of fraud and misrepresentation by Celsius management by increasing customer recoveries by 5%. Account holders may still retain the rights to bring individual claims against Celsius if they opt out of the settlement. According to court documents:
"Any eligible Account Holder who does not exclude themselves from the Settlement will receive a claim in the amount of 105% of their scheduled claim, which will supersede and extinguish any related Proof of Claim filed by such Account Holder."
The second agreement offers a resolution for clients with funds in Earn that earn Celsius interest. Under the proposed deal, customers who borrowed crypto funds will be able to receive a portion of their funds in crypto assets, along with compensation in shares of the new company arising from the bankruptcy proceedings.
"[...] creditors have agreed to support a modified Plan that will provide Retail Borrower Deposit Claim Holders with (a) the option to pay the principal balance of their loan [...] in exchange for an equivalent amount of cryptocurrency (which could result in tax benefits for such Holders compared to the Clearing Treatment) and (b) priority in choosing a preference to exchange NewCo Equity for Liquid Cryptocurrency at a 30% discount [...]โ, the document says.
Celsius filed for Chapter 11 bankruptcy in July 2022 after announcing a pause on all withdrawals amid market turbulence stemming from the collapse of the Terra ecosystem. One 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 has 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 deals, 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 allegedly "wasting[ing] billions in user depositsโ after โcheatingโ users.
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