Cryptocurrency lender Celsius Network is expected to allocate additional funds of $127 million to its creditors as part of its reorganization plan. It will be from the company second distributionfollowing a payment of US$2.53 billion made earlier this year.
The amount of Bitcoin distributed in these payments is based on a predetermined price of $95,836.23 per Bitcoin.
According to a notice dated November 27, creditors who fall into five categories – “retail borrower deposits, general income claims, retention claims, unsecured loan claims and general unsecured claims” – can be eligible to receive a portion of their credits back.
The process continues
Each eligible creditor will receive a full distribution worth approximately 60.4% of their original credit. They would have received about 57.65% of their claims during the first payment in January.
The second distribution will be made in cash or cryptocurrency, most likely Bitcoin. Bitcoin refunds will be set at a predetermined price of $95,836.23 per coin.
In other words, creditors will likely receive a lower amount of Bitcoin than they expected. At the time of Celsius’ bankruptcy filing in July 2022, Bitcoin was valued at less than $40,000. It is currently trading above $95,000, a 137% increase from its price at the time of Celsius’ bankruptcy filing, according to data from CoinGecko.
Some creditors may have received a slightly higher initial distribution due to a correction, as noted in the notice. For those who have not yet received the initial distribution, Celsius states that this time it will send both distributions.
Refunds will be made via PayPal or Venmo for creditors who previously opted for these methods in the first distribution. Celsius also notes that all creditors must go through the KYC/AML process to receive their distributions.
For lenders who were supposed to receive funds through Coinbase but did not receive them by November 9th, Celsius will automatically switch the transfer assets to a different platform.
With a high BYC price, lenders will receive a good amount based on their holdings.
Bankruptcy approaches the finish line
The collapse of Earth’s LUNA/UST triggered a market-wide downturn that ultimately led to the demise of the Celsius Network. The once-prominent cryptocurrency lending platform filed for Chapter 11 bankruptcy in July 2021, leaving its customers suffering from huge financial losses.
At the time of the bankruptcy filing, Celsius held approximately $4.7 billion in customer assets but had only $167 million in liquidity remaining.
In September 2023, creditors approved a reorganization plan that proposed repaying customers through a combination of cryptocurrency and shares in a newly formed Bitcoin mining company called Ionic Digital Inc.
As part of the bankruptcy resolution, Celsius began distributing funds to creditors. The plan is to repay more than US$3 billion to 375,000 creditors. As of August 2024, 251,000 creditors would have received a total of $2.53 billion in crypto and fiat assets, meaning many have yet to claim their funds.
The upcoming distribution of funds is expected to bring the Celsius Network bankruptcy case closer to its final resolution. However, there are legal problems associated with former leaders.
Alex Mashinsky, former CEO of Celsius, faces seven criminal charges related to the company’s collapse, including alleged manipulation of the Celsius token (CEL).
Mashinsky filed a motion to dismiss the charges against him. However, earlier this month, a federal judge denied the request. The case will move forward, with Mashinsky on trial on two counts of merchandise fraud.
If convicted of all seven charges, Mashinsky could face a maximum prison sentence of up to 115 years. His trial is scheduled to begin in January 2025.
Marc Mukasey, previously represented by Mashinsky, has been chosen to be counsel for Sam Bankman-Fried, former CEO of FTX.
Shared legal representation can generate conflicts, as both cases involve allegations of fraud in the cryptocurrency sector. However, Judge Kaplan allowed Bankman-Fried to hire his lawyers.
