Celsius to Distribute $127 Million – Creditors Allege Mismanagement

The latest payout, constituting approximately 2.75% of total claims, brings Celsius’ total creditor recovery to about 60%. Creditors eligible for this distribution span various categories, including retail deposits, unsecured loan claims, and general earn claims. Those with convenience class claims remain excluded. The funds will primarily be paid in cryptocurrency, pegged at an average Bitcoin price of $95,836 per coin—significantly higher than the cryptocurrency’s market value at Celsius’ bankruptcy filing in July 2022.

Payments are set to be processed through platforms such as Coinbase, PayPal, and Venmo, or as cash for creditors unable to receive crypto. However, creditors must complete stringent KYC/AML procedures before receiving distributions.

The court filing reveals that creditors will receive payouts based on the value of their claims as of the petition date. Source: Cases/stretto

This payout follows a $2.53 billion initial distribution earlier this year to 251,000 creditors, representing roughly 57.65% of claims. Critics contend that the latest payment, though a step forward, falls short of offering meaningful relief to those who faced significant financial losses. Many creditors argue that their trust in Celsius came at an immense cost, and the distribution fails to reflect the scale of their hardships.

Celsius filed for bankruptcy in July 2022 after a $1.2 billion deficit was revealed in its balance sheet. Once considered a leader in crypto lending, the platform’s collapse came amid the broader crypto downturn triggered by Terra’s LUNA/UST implosion. At the time of its bankruptcy, Celsius reportedly held $4.7 billion in customer assets but had only $167 million in liquidity.

Efforts to resolve creditor claims have been met with logistical challenges and allegations of mismanagement. Celsius’ former mining subsidiary, now rebranded as Ionic Digital, has faced internal turmoil, including multiple leadership resignations. Some creditors have pushed for its liquidation amid doubts about its viability as a public company by 2025.

Legal action against Alex Mashinsky, Celsius’s co-founder and former CEO, has further hampered the bankruptcy process. Mashinsky faces seven criminal accusations for allegedly deceiving investors about the platform’s hazards, including fraud and market manipulation. Trial procedures are scheduled for January 2025 after his appeal to have the charges dismissed was denied. Mashinsky faces a maximum sentence of 115 years in prison if found guilty.

Furthermore, Celsius is now subject to heightened regulatory scrutiny as a result of ongoing litigation from the Federal Trade Commission (FTC) and the U.S. Securities and Exchange Commission (SEC). Critics contend that these legal battles distract from efforts to reimburse creditors.

Celsius is not alone in its struggles. Other bankrupt crypto firms like Voyager Digital and BlockFi have also struggled to refund creditors, often repaying only a fraction of claims. By contrast, FTX, which filed for bankruptcy in November 2022, is preparing a repayment plan but has yet to make distributions.

Source: X

While Celsius’ repayment efforts mark a relative improvement over peers, many creditors remain dissatisfied. Users have flooded social media networks with complaints, claiming that the company’s activities have left them in financial disaster.

The Celsius case highlights the hazards involved with uncontrolled cryptocurrency lending platforms. Critics believe that its failure exemplifies the cryptocurrency industry’s overall lack of accountability. For creditors, the second payout offers some relief but highlights the enduring challenges of recovering losses from crypto collapses.