Celsius, a cryptocurrency platform that recently declared bankruptcy, has distributed $2 billion worth of digital assets to thousands of creditors. The distribution process, carried out through PayPal and Coinbase, is part of Celsius Network’s ongoing efforts to fulfill its obligations to creditors.
In a recent court filing, the law firm Kirkland & Ellis, which is advising Celsius, provided an update on the distribution of funds to creditors as outlined in the company’s restructuring plan. This update follows the company’s announcement of its emergence from bankruptcy, which began in July 2022.
According to Kirkland & Ellis, the distribution of cryptocurrency to creditors in the US is being conducted via PayPal, while Coinbase is serving as the distribution agent for overseas creditors. The law firm also confirmed that $2 billion worth of crypto assets, including 20,255.66 Bitcoin and 301,338.77 Ether, have been transferred to creditors.
The decision to distribute cryptocurrency instead of cash, which is typically done in Chapter 11 bankruptcies, has allowed for a faster distribution process, according to the filing. The legal team stated that the distribution process has been successful so far, with no major operational or security issues encountered.
However, account holders who did not agree to the restructuring plan will not receive any distribution until their claims are resolved. The filing also noted that certain account holders may face difficulties in receiving their distributions if Coinbase or PayPal identifies any compliance or Anti-Money Laundering (AML) issues.
Furthermore, the filing stated that distribution agents have the right to refuse to distribute funds to anyone who does not meet their compliance and other requirements.
Celsius Network LLC, a platform managing approximately $25 billion in customer assets for cryptocurrency lending and borrowing, filed for Chapter 11 bankruptcy on July 13, 2022. On the same day, the company’s founder and former CEO, Alex Mashinsky, was arrested and charged with multiple offenses, including securities, commodities, and wire fraud.
The charges against Mashinsky and another executive allege that they were involved in financial schemes, intentionally misrepresented the company’s business model, and manipulated the value of Celsius’s proprietary token, CEL. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission also filed civil charges against Mashinsky and Celsius for similar reasons.
As part of a settlement with the Federal Trade Commission (FTC), Celsius agreed to pay a $4.7 billion fine, with the condition that creditors are reimbursed. This settlement is one of the largest in the FTC’s history and highlights the repeated deception by Celsius and Mashinsky, according to the FTC.
While Mashinsky’s arrest and charges may bring some relief to creditors, there are concerns within the industry about the underlying attitudes that led to the platform’s rapid growth and eventual collapse. Mashinsky has pleaded not guilty to seven felony counts and was released on a $40 million bond. However, the case is still ongoing, and Mashinsky is expected to go to trial on September 17, after resigning as CEO in September 2022.
On January 5, Celsius announced its plans to unstake its Ethereum holdings, which have been generating significant staking rewards, in order to cover expenses incurred during the restructuring process and speed up distributions to creditors.
The bankruptcy of Celsius and the legal actions taken against Mashinsky have had an impact on the cryptocurrency industry, highlighting the importance of transparency, accountability, and compliance with regulations.
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