Celsius Network Reaches Key Settlements to Resolve Litigation
Agreements provide for distributions to customers by year-end Celsius Network was one of the biggest crypto firms catering to retail investors and became one of the first large implosions in the industry when it filed for bankruptcy last year. Photo: Pavlo Gonchar/Zuma Press By Soma Biswas July 21, 2023 5:50 pm ET | WSJ Pro Celsius Network reached settlements that potentially clear a path for the crypto lender to win court approval for its plan to return assets to its customers and conclude its bankruptcy. One of the settlements resolves customer claims over allegations of fraud and misrepresentation by prior Celsius management by bumping up recoveries by 5%. The agreement resolves 30,000 claims seeking $78 billion in compensation, according to court paper
Celsius Network was one of the biggest crypto firms catering to retail investors and became one of the first large implosions in the industry when it filed for bankruptcy last year.
Photo: Pavlo Gonchar/Zuma Press
Celsius Network reached settlements that potentially clear a path for the crypto lender to win court approval for its plan to return assets to its customers and conclude its bankruptcy.
One of the settlements resolves customer claims over allegations of fraud and misrepresentation by prior Celsius management by bumping up recoveries by 5%. The agreement resolves 30,000 claims seeking $78 billion in compensation, according to court papers filed on Thursday by lawyers for Celsius.
The settlements set the stage for a confirmation hearing on Celsius’s reorganization plan in October before U.S. Bankruptcy Judge Martin Glenn and for customers to start receiving disbursements of crypto and other assets by the end of the year, according to the court papers.
Lawyers for Celsius had argued customers were owed no more money than what they deposited on its platform, but many users filed claims seeking damages over alleged misconduct by the company’s former management, according to the court papers.
Celsius founder Alex Mashinsky was arrested last week and charged with defrauding customers. Three federal agencies also filed civil lawsuits against him.
Celsius was one of the biggest crypto firms catering to retail investors and became one of the first large implosions in the industry when it filed for bankruptcy last year. The company suffered steep losses on risky investment strategies amid a collapse in the crypto markets, and by the time it sought chapter 11 protection it had $1.75 billion worth of crypto in its coffers, compared with $4.75 billion it owed customers.
A second settlement resolves a dispute between two of the biggest groups of customers of the crypto firm, those with deposits in its high-interest accounts and others who took out fiat-currency loans. The borrowers’ group had argued for more favorable treatment than the high-interest account holders. The borrowers won some concessions, including the ability to get back crypto used as collateral upon repayment of their loans.
Celsius’s reorganization plan proposes returning a portion of customers’ crypto and compensating them with shares of a new company emerging from the crypto lender under the management of a group of investors led by TechCrunch co-founder Michael Arrington. The new company will manage Celsius’s bitcoin mining business and other illiquid assets.
Celsius will seek court approval for the settlements at a hearing on Aug. 10.
Write to Soma Biswas at [email protected]
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