Celsius creditors vote in favor of reorganization plan

September 26, 2023 Coin Telegraph

The majority of Celsius creditors have voted in favor of a plan that will see approximately $2 billion worth of Bitcoin and Ethereum returned to creditors.

The creditors involved in the Celsius bankruptcy case have voted in favor of a plan that will see funds returned to them as well as distributing equity through a new company.

According to a Sept. 25 filing from bankruptcy firm Stretto, most of the classes voted in favor of the plan by more than 98%.

The voting results are in! Over 95% of creditors across all eligible classes voted to accept the Plan, a testament to our collaborative efforts during Chapter 11. https://t.co/9Z5xlBhNts @CelsiusUcc @FahrenheitHldg.
— Celsius (@CelsiusNetwork) September 25, 2023

While voters have made a near-unanimous decision on the plan, the plan still needs final approval at a confirmation hearing in the United States Bankruptcy Court for the Southern District of New York scheduled for Oct. 2.

*Celsius network creditor class vote breakdown. Source: Stretto*

According to a disclosure statement filed on Aug. 17, the current plan will see approximately $2 billion worth of Bitcoin (BTC) and Ether (ETH) redistributed to Celsius Network creditors. The plan will also distribute equity in a new company, temporarily dubbed “NewCo.”

“NewCo will operate and further build out the Debtors’ Bitcoin mining operations, stake Ethereum, monetize the Debtors’ other illiquid assets, and develop new, value-accretive, regulatory-compliant business opportunities," it wrote.

Notably, the new company will be managed by the Fahrenheit Group — a consortium of crypto-native individuals and organizations including former Algorand CEO Steven Kokinos, venture capital firm Arrington Capital, crypto miner US Bitcoin Corp, Proof Group Capital Management and Arrington Capital advisor Ravi Kaza.

Celsius Network was one of the first major casualties of the 2022 bear market, with the now-defunct crypto lender filing for bankruptcy on July 14, 2022.

On July 13, 2023, the SEC sued Celsius and its former CEO Alex Mashinsky for allegedly raising billions of dollars through unregistered and fraudulent offers involving “crypto asset securities.”

Mashinsky was then arrested on the same day, following an indictment from the U.S. Department of Justice, which accused the former CEO of fraudulent financial activity, misleading investors and a number of other similar charges.

Magazine: How to protect your crypto in a volatile market — Bitcoin OGs and experts weigh in

Celsius Network files ‘adversary complaint’ against EquitiesFirst

September 7, 2023 Coin Telegraph

Alex Mashinsky

Bankrupt crypto lender Celsius Network is attempting to recover assets from a private lender called EquitiesFirst Holdings, which reportedly owes $439 million in cash and crypto.

Bankrupt crypto lender Celsius Network has filed a complaint against lending firm EquitiesFirst Holdings in a bid to recoup assets.

According to a sealed adversary complaint filed on Sept. 6, Celsius is seeking injunctive relief and a declaratory judgment associated with the "recovery of money/property" — according to the title of the docket.

The filing named both EquitiesFirst and its CEO Alexander Christy as defendants. Additionally, Celsius filed a summons on the same day, requiring that the private lender provide a motion or answer within 35 days.

*The sealed adversary complaint filed against EquitesFirst Holdings. Source: Stretto*

EquitiesFirst Holdings is an Indianapolis-based private lending company that reportedly owed Celsius Network $439 million as of July 2022.

Celsius first began taking collateralized loans from EquitiesFirst in 2019 to “support its operations” owing to what Alex Mashinsky described in a subsequent bankruptcy filing as a “lack of institutional lending available to cryptocurrency companies,” at the time.

However, in July 2021, Celsius Network sought to retrieve the collateral it had pledged to EquitiesFirst but was informed that the lender could not return the amount Celsius had provided.

As of July 2021, Celsius was owed a total of $509 million by EquitiesFirst. The increase from $439 million to $509 million was due to the loans being over-collateralized. Since September 2021, the debt has been slowly repaid at a rate of $5 million per month.

As of July 2022, EquitiesFirst owed Celsius $439 million, with the debt being comprised of $361 million in cash and 3,765 Bitcoin (BTC).

Celsius Network was among the major casualties of the 2022 bear market, filing for Chapter 11 bankruptcy protection on July 14, 2022.

Celsius’ former CEO Alex Mashinky was arrested on July 13 this year, with authorities accusing him of misleading Celsius users and defrauding investors out of billions of dollars.

Notably, The Federal Trade Commission issued Celsius with $4.7 billion in fines for allegedly “duping” users, but suspended the judgement in order for the platform to use the assets as part of its bankruptcy proceedings.

Celsius creditors are currently voting on a settlement plan that — if approved — would see a consortium called Fahrenheit buy Celsius’ assets and return Celsius creditors funds by way of launching a new company.

Magazine: How to protect your crypto in a volatile market — Bitcoin OGs and experts weigh in

‘Unjustly enriched:’ Core Scientific knocks back $4.7M claim from Celsius

May 9, 2023 Coin Telegraph

‘Unjustly enriched:’ Core Scientific knocks back .7M claim from Celsius

Bitcoin

Core Scientific has rejected a multi-million-dollar administrative claim from Celsius Network, arguing it's owed an even higher amount from the crypto lender.

Bankrupt Bitcoin (BTC) mining firm Core Scientific has objected to paying a $4.7 million administrative claim put forward by crypto lender Celsius Network, leading to a battle between the firms over contractual obligations.

According to the objection, which was filed in Texas bankruptcy court on May 5, Core Scientific has asked that Celsius Network’s $4.7 million administrative claims be rejected as the firm cannot prove it is entitled to one.

“Celsius’ request for allowance and immediate payment of the Celsius alleged admin claim ignores that Core has substantial claims against Celsius, which Core believes exceed the Celsius alleged admin claim,” wrote the objection.

For context, Core first signed a contract with Celsius in 2020 to host its cryptocurrency holdings in Core’s data centers. However, due to an increase in the price of power, Core passed these additional costs on to Celsius, an allowance that was reportedly stipulated in the original contract.

*Core Scientific’s 2020 contract with Celsius Network. Source:* *Court Filing*.

Despite Celsius initially paying these costs, the crypto lender ceased payments after it filed bankruptcy, Core Scientific claimed in the objection.

“If anyone has been unjustly enriched here, it is Celsius,” wrote Core Scientific in the objection. According to the now-defunct Bitcoin miner, Celsius has been “sitting on almost $8 million of money it owes to Core'' due to a “blatant post-petition violation” of the agreed-upon dispute resolution mechanism.

In total, Celsius now allegedly owes Core Scientific approximately $11 million, a sum that accrues an additional $28,000 in fees and interest with each passing day, the Bitcoin mining firm's lawyers argued.

The conflict between the two firms has been raging since Oct. 19, when Core Scientific first accused Celsius of failing to pay its power bills, citing the non-payments as a significant factor in the liquidity issues that led to the embattled Bitcoin miner filing for Chapter 11 bankruptcy on Dec. 21.

“The millions of dollars Celsius shortchanged Core after Celsius’s bankruptcy filing plus the millions of dollars in litigation…significantly contributed to Core’s liquidity drain and eventual chapter 11 filing.”

On Dec. 28, Core Scientific filed a motion seeking approval to reject Celsius’ contracts, claiming the firm’s failure to pay its power bills constituted a material breach of contract. On Jan. 3 Celsius agreed to let Core Scientific shut down more than 37,000 Bitcoin mining rigs the miner was hosting for the crypto lender.

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Celcius reportedly prepping litigation against creditor for leaking internal info

April 15, 2023 Coin Telegraph

Alex Mashinsky

Creditor Tiffany Fong has argued that she hasn’t done anything wrong, asserting that she didn’t break any non-disclosure agreements by reporting on the leaked information.

A court filing indicates that bankrupt crypto lender Celsius Network either intended to, or is potentially looking at taking legal action against crypto blogger and Celsius creditor Tiffany Fong over leaking internal information.

looks like they want to/wanted to even though they owe me $ insane. pic.twitter.com/0EPxVZ6e3f
— Tiffany Fong (@TiffanyFong_) April 14, 2023

A screenshot shared by Fong shows that she currently has roughly $119,000 worth of crypto assets such as Bitcoin (BTC), Ether (ETH) and Polygon (MATIC) locked on Celsius, after the firm paused withdrawals in mid-June 2022, prior to filing for Chapter 11 bankruptcy the following month.

Since then, she has been actively reporting on the bankruptcy case as it unfolds via YouTube and other social media platforms. On multiple occasions, Fong has shared leaked internal information, which she claims was given to her privately by disgruntled former Celsius employees.

In an itemized sixth monthly fee statement from Celsius’ counsel Kirkland & Ellis International submitted to the bankruptcy court of the Southern District of New York on April 14, the law firm reported that it had worked 77 billable hours worth roughly $72,000 on an invoice titled “Tiffany Fong litigation.”

Paralegal Ken Sturek billed creditors for hours of “work” spent looking through @TiffanyFong_’s Social Media and then outsourcing the voyeurism to @FTIConsulting.

Ken should consider becoming a reporter for the @nypost if his law gig doesn’t pan out. pic.twitter.com/1Bl16dgmgk
— Cam Crews (@camcrews) April 14, 2023

The law firm’s work on this case started on Jan. 26, with the last recorded hours of work being reported on Feb. 6.

While a concrete legal action doesn’t appear to have been formulated as of yet, the filing shows Celsius’ legal counsel was specifically looking into the leaked information Fong reported on via her social media accounts.

In the filing, Celsius law firm also outlined that it was drafting cease and desist letters for Fong, and also a motion to compel, which generally asks courts to enforce a request for information relevant to a case.

To name a few examples, Fong has reported on leaked internal information relating to company bids on Celsius assets, alleged audio of private company discussions and alleged transaction activity of execs such as former CEO and founder Alex Mashinsky.

They tried real hard to hide it only giving it a brief note and then hiding in in the supportive docs. https://t.co/OMgyD95Itz
— Keith (@ChazzonKe) April 14, 2023

Speaking with Cointelegraph, Fong didn’t mince her words as she alleged that Celsius is “using customer funds in an attempt to sue a creditor” over something that she asserts isn’t a legal issue to begin with:

“It’s bullshit I didn’t do anything illegal. I'm not an employee so I didn’t break an NDA [non-disclosure agreement]. I’m a creditor and they owe me 3.1 BTC & 11.6 ETH.”

Cointelegraph has also reached out to Celsius for comment on the potential litigation, and will update this article if the company responds.

Adding fuel to the fire, Fong is currently in New York attending the 2023 NYC NFT event, and posting on Twitter on April 15, she revealed that found Alex Mashinsky and his wife Krissy Mashinsky out in public, and approached them.

LMAO @mashinsky pic.twitter.com/4SarjCAXvY
— Tiffany Fong (@TiffanyFong_) April 14, 2023

A video posted to Twitter also shows the Mashinsky couple hurriedly walking away as other crypto content creators such as BitBoy Crypto (Ben Armstrong) approach alongside Fong in an attempt to engage them in conversation.

At https://t.co/yX3oBFOarc, @Bitboy_Crypto and @TiffanyFong_ met with @Mashinsky and @KrissyMashinsky.
(Filmed by @JeffTutorials) pic.twitter.com/5Vw85Jqtl1
— Celsians (@CelsiansNetwork) April 14, 2023

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DOJ objects to Celsius plans to reopen withdrawals and sell stablecoins

October 3, 2022 Coin Telegraph

Celsius

The objection is seeking a deferral on Celsius motions until the independent examiner report on the company is filed over the next couple of months.

The Department of Justice (DOJ) has submitted an objection to Celsius’ motion to reopen withdrawals for select customers and sell its stablecoin holdings.

The DOJ is asserting that the state of Celsius’ financials are lacking transparency, and that key decisions like this should not be considered until the independent examiner report has been filed.

The move by the DOJ adds to the objections filed last week by the Texas State Securities Board, the Texas Department of Banking, and the Vermont Department of Financial Regulation. All three are opposed to Celsius selling its stablecoin holdings, asserting there’s a risk the firm could use the capital to resume operating in violation of state laws.

In a Sept. 30 filing with the Bankruptcy Court for the Southern District of New York, a U.S. Trustee for the DOJ, William Harrington outlined an objection to Celsius opening up withdrawals to its "custody" and "withhold" customers, citing a lack of transparency over the firm’s financials.

Harrington argues in the filing that such withdrawals should not be opened up until the independent examiner report on Celsius business operations has been completed.

“The Motions are premature and should be denied until after the Examiner Report is filed. First, the Withdrawal Motion seeks to impulsively distribute funds to one group of creditors in advance of a fulsome understanding of the Debtors’ cryptocurrency holdings.”

The DOJ has also opposed a potential stablecoin sell off, highlighting similar concerns held by Texas and Vermont regulators that Celsius’ motion doesn’t concretely outline “what impact such a distribution or sale would have” on the business moving forward.

“Second, the Stablecoin Motion seeks to liquidate stablecoins held by the Debtors without providing information regarding ownership, segregation, or the impact of such sale on later distributions to creditors who may have stablecoins on deposit with the Debtors,” the filing reads.

Independent examiner appointed

According to Harrington, the “United States Trustee appointed Shoba Pillay” the examiner on Sept. 29, with the New York Bankruptcy court approving the appointment on the same day.

Pillay will have roughly two months to prepare and file an examiner’s report on Celsius, hopefully providing a clear breakdown of its assets and liabilities.

Harrington essentially asserted that Celsius’ motions should not even be considered until well after the examiner report has been filed, noting that “any distribution or sale should be deferred until interested parties, the United States Trustee, and the Court are able to make a determination” on the value of Celsius liabilities, claims against it, its assets and what “the debtors intends to actually pay its creditors.”

Simon Dixon, the founder of crypto investment platform BnkToTheFuture — which was the lead investor in Celsius — predicted via Twitter on Oct. 1 that Celsius will look to repay its creditors in Celsius (CEL) tokens as part of a reorganization plan that ultimately “won’t get past regulators & regulators will file motions to reject” it.

If such occurs, Dixon sees it sparking a bidding war for Celsius assets, similar to that of Voyager Digital’s recent $1.3 billion asset auction that was won by FTX US.

3/9) This will drive the vultures into a bidding process where the vultures will try & buy the assets we paid for without our consent & FTX & TradFi will give us pennies on the dollar. It will be a lot worse for creditors than @investvoyager due to size of hole. pic.twitter.com/4EqspGx9iF
— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) October 1, 2022

Texas, Vermont regulators object to Celsius stablecoin sale plan

September 30, 2022 Coin Telegraph

Celsius

A key concern is that the firm hasn’t explicitly outlined what it will do with the stablecoin sale proceeds.

State regulators from Texas and Vermont have filed a motion objecting to embattled crypto lender Celsius’ plans to sell off its stablecoin holdings.

Separate motions from both regulators filed on Sept. 29 argue that there’s a risk the firm could use the capital to resume operating in violation of state laws.

The filings come after a Sept. 15 notice from Celsius' legal team asking the United States Bankruptcy Court for the Southern District of New York for permission to sell its stablecoin holdings, reportedly worth around $23 million. A hearing to accept or decline the motion will occur on Oct. 6.

However, the move has not gone down well with the Texas State Securities Board (SBB), the Texas Department of Banking, and the Vermont Department of Financial Regulation, who filed objections on Sept. 29.

The two Texan regulators in a joint filing outlined that “more than 40 states” are currently investigating Celsius’ pre-bankruptcy activities in relation to potential unregistered securities offerings.

Texas regulators also highlighted a concern that if Celsius sells off its holdings, the firm may resume non-compliant offerings in the state, given that it is still not registered with the Texas SBB. At the same time, the Vermont regulator also highlighted similar concerns in its own objection.

A key concern across the regulators is that the firm hasn’t explicitly outlined what it will do with the funds after it sells the stablecoins.

“It is not at all clear what the debtors intend to do with the proceeds of any such sales, whether the relief requested extends to Stablecoin-denominated assets such as retail loans to consumers, and the degree to which Debtors’ use of sale proceeds will be supervised by the Court,” the Vermont regulator's filing reads, while the Texan filing notes that:

“Texas is extremely concerned by the Debtors’ request for an order that allows ambiguously broad authority to sell and/or exchange the assets.”

As such, the state regulators are requesting that Celsius’ motion be denied, with the Texan regulators asserting that it would “only act to confound the examination and further muddy the already opaque waters that are the Debtors’ cryptocurrency assets.”

However, the Texan regulators also said that should the motion in question be approved, the “relief granted to the Debtors should be limited to selling stablecoin and holding the proceeds of such sale solely for the benefit of creditors of the bankruptcy estate.”

The Celsius bankruptcy case has been highly complicated thus far, given the cloudy nature of the firm’s balance sheet. Earlier this month, the United States Bankruptcy Court of the Southern District of New York granted a motion for Celsius to appoint an independent examiner to investigate aspects of its business.

Celsius bankruptcy

Independent examiner appointed

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