Celsius Initiates Second $127M Payout to Creditors - Blockonomi
by Nicholas Say · BlockonomiCryptocurrency lender Celsius Network is set to allocate additional $127 million funds to its creditors as part of its reorganization plan. It will be the firm’s second distribution, following a $2.53 billion payout made earlier this year.
The amount of Bitcoin distributed in these payouts is based on a predetermined price of $95,836.23 per Bitcoin
According to a notice dated Nov. 27, creditors who fall into five categories—”retail borrower deposits, general earn claims, withhold claims, unsecured loan claims, and general unsecured claims”—may be eligible to get back a portion of their claims.
The Process Grinds On
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Each eligible creditor will receive a total distribution amounting to approximately 60.4% of their original claim. They reportedly received around 57.65% of their claims during the first payout in January.
The second distribution will be made in either cash or cryptocurrency, likely Bitcoin. The Bitcoin repayment will be set at a predetermined price of $95,836.23 per coin.
In other words, creditors are likely to receive a lower value in Bitcoin than what they might have expected. At the time of Celsius’s bankruptcy filing in July 2022, Bitcoin was valued at less than $40,000. Currently, it is trading above $95,000, up 137% from its price at the time of Celsius’s bankruptcy filing, according to CoinGecko data.
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 their initial distribution, Celsius states it will send both distributions this time.
Repayment will be made through PayPal or Venmo for creditors who chose these methods previously in the first distribution. Celsius also notes that all creditors must pass the KYC/AML process to receive their distributions.
For creditors who were supposed to receive funds through Coinbase but haven’t received them by November 9, Celsius will automatically switch transfer assets to a different platform.
With a high BYC price, the creditors will be getting a nice amount based on their holdings.
Bankruptcy Nears Finish Line
The collapse of Terra’s LUNA/UST triggered a market-wide downturn that ultimately led to the demise of Celsius Network. The once-prominent cryptocurrency lending platform filed for Chapter 11 bankruptcy in July 2022, leaving its customers reeling from huge financial losses.
At the time of its 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 over $3 billion to 375,000 creditors. By August 2024, 251,000 creditors reportedly received a total of $2.53 billion in crypto and fiat assets, meaning many yet to claim their funds.
The forthcoming distribution of funds is expected to bring the Celsius Network bankruptcy case closer to its final resolution. Yet, there are legal troubles associated with former leaders.
Alex Mashinsky, the ex-CEO of Celsius, is facing seven criminal charges related to the company’s collapse, including the alleged manipulation of the Celsius (CEL) token.
Mashinsky filed a motion to dismiss charges against him. However, earlier this month, a federal judge denied the request. The case will move forward, with Mashinsky facing trial on two counts of commodities fraud.
If convicted on 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 Mashinsky, has been chosen to be attorney of Sam Bankman-Fried, FTX’s former CEO.
The shared legal representation could lead to conflicts since both cases involve allegations of fraud in the cryptocurrency sector. However, Judge Kaplan allowed Bankman-Fried to retain his attorneys.