Bankrupt crypto lending firm Celsius Network has announced plans to distribute $127 million from its litigation recovery account, a significant step in its ongoing bankruptcy proceedings.
The troubled lender noted that the distribution aims to compensate eligible creditors of classes 2, 5, 7, 8, and 9 impacted by the company’s collapse.
A Notice of Commencement filed on November 27 in the United States Bankruptcy Court for the Southern District of New York indicates that these categories encompass retail borrower depositors, participants in the “Earn” program, and creditors with withhold claims, unsecured loans, or general unsecured claims. However, it excludes users with convenience claims or those not eligible for illiquid recovery rights.
Celsius to Pay With Crypto
Following the notice, creditors will receive payments primarily in crypto through the platforms used for previous distributions, such as PayPal, Venmo, or Coinbase. Those without verified accounts on these platforms will receive cash payments instead. Corporate creditors are also eligible for payments, though those with convenience claims are excluded.
Despite the latest announcement concerning a second payment, some crypto users on X are dissatisfied. An X user stated that there are still so many creditors with unresolved distributions.
Celsius Misleads Clients
Celsius filed for bankruptcy in July 2022. Its former CEO, Alex Mashinsky, was arrested and charged with fraud in July 2023, accused of misleading depositors about the investment risks associated with the platform. His trial is set to commence in January 2025.
In March, several Celsius corporate creditors alleged that their payments were reduced by 30% because the debtors’ estate exclusively used Coinbase to handle distributions.
While the $127 million distribution marks progress, many creditors still await full resolution. The litigation recovery account has been a critical resource in Celsius’ efforts to address outstanding claims. Still, significant challenges remain as the company continues to sort out its financial and legal obligations.
Meanwhile, Celsius is not the only firm repaying its creditors. For instance, the trustee of Mt. Gox, the now-infamous Bitcoin exchange that collapsed in July 2014, initiated a repayment plan in July. The trustee noted that the repayment will be made in bitcoin and Bitcoin Cash, which were recovered from Mt. Gox’s remaining assets.
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