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.

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Celsius eyes merge of entities as creditors claim distinctions were a ‘sham’

May 3, 2023 Coin Telegraph

celsius court case

New court filings are pushing to straighten out the issue in a bid to help recover lost funds for customers.

Defunct crypto lender Celsius Network is looking to combine its United Kingdom and United States entities as new court filings allege that any supposed distinction between the two companies was a “sham.”

The central point of dispute is focused on a decision made by the crypto lender in June 2021, when Celsius Network Limited (CNL) was issued with a warning to cease operations in the U.K. from the country’s Financial Conduct Authority.

To avoid fallout, CNL set up a Limited Liability Company — Celsius Network LLC — in the state of Delaware and looked to transfer its assets to the new company.

1) #Celsius left UK as they were offering illegal securities & were getting pressure from UK Securities Regulator (FCA). Yes securities laws exist outside US. pic.twitter.com/2bu3uJq9Fr
— Simon Dixon (@SimonDixonTwitt) December 29, 2022

According to a May 1 court filing from the now-bankrupt crypto firm, the migration of the two entities “resulted in intercompany chaos.” The filing adds that formal documentation of the intercompany relationship was “not completed for several months” and when it was “it remained ambiguous” what transactions the agreements affected.

The filing claims that for everyday investors the result of this transfer was too confusing to make sense of, however, the more “sophisticated” Series B investors were well aware of the implications of such dubious record keeping.

As a result, the two entities should be treated as one and the same in subsequent bankruptcy proceedings, so that smaller creditors are not ignored in favor of Series B investors when it comes to the recovery and return of lost funds.

According to a corresponding court filing from the Celsius Official Committee of Unsecured Creditors (UCC), the migration was a “sham” and the transactions that facilitated the transfer of billions of dollars worth of assets between the two were likely fraudulent.

Simon Dixon, who reportedly lost more than $8.8 million worth of Bitcoin (BTC) as a result of the Celsius collapse, summarised the UCC filing in a series of tweets on May 2 saying “Celsius acted as if the migration never occurred” and was given “poor documentation” and “no clear distinctions” to distinguish between the two entities.

UCC argument for substantive consolidation and joinder to #Celsius motion. They argue that CNL & LLC have always been the same entity and the whole CNL to LLC transfer was a sham. Creditors & Celsius itself saw CNL & LLC as functionally the same. They assert that while CNL…
— Simon Dixon (@SimonDixonTwitt) May 2, 2023

In a March 9 memorandum opinion, Chief U.S. Bankruptcy Judge Martin Glenn found that customers only had claims against Celsius’ Delaware-based LLC, meaning that Series B investors stand to be more likely to receive recompensation.

The auction of the remaining Celsius assets is scheduled to go ahead on Wednesday, May 3, with a number of major firms including the exchanges Coinbase and Gemini vying for possession of the defunct firms’ assets.

NovaWulf Digital Management currently stands as the “stalking horse bidder,” a term used to describe the first mover that sets the bar for the ensuing bids. NovaWulf’s proposal includes a direct cash contribution in the range of $45 million to $55 million. If NovaWulf’s proposal is accepted, customers can expect to recover up to 70% of their funds.

The auction marks a significant step forward for Celsius’ customers in recovering their funds, after the firm filed for Chapter 11 bankruptcy protection on July 14, 2022.

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This publisher is trying to wipe ‘all trace’ of Mashinsky’s book online, but it’s hard

February 10, 2023 Coin Telegraph

Bankruptcy

A slated financial literacy book by Alex Mashinsky has already been canceled but the book’s publisher is still trying to wipe all traces of it from the internet.

A book once slated to be released by Alex Mashinsky, the former CEO and founder of the bankrupt cryptocurrency lender Celsius, has been pulled before it could ever hit the shelves and the publisher of the title is trying to “remove all trace of it online.”

The Mashinsky Method: The Decentralized Path to Financial Freedom was the name of an upcoming financial literacy book by Mashinsky with a tentative release date set for sometime in June.

It promised to teach his “7-step method” on “how to protect your assets and how to create compounding yield [...] Using stablecoins and other crypto such as Bitcoin,” according to a description on Amazon.

One Australian book retailer had the price of the title set to $46.25 Australian dollars ($32).

The book’s publisher, Wiley, reconfirmed in a Feb. 6 tweet that the book “has been canceled” after a Twitter user came across a listing of the purportedly upcoming book.

This book has been cancelled. Please be aware that once a book is cancelled, removing all trace of it online can be a complex process. We’re continuing to work with retailers and other partners to update their data with correct information.
— Wiley (@WileyGlobal) February 6, 2023

“Once a book is canceled, removing all trace of it online can be a complex process,” Wiley added. It said it was working with retailers to update their data to show the book would no longer be released.

Wiley first confirmed the book wouldn’t be published in a tweet last November. At the time, it said it was working with retailers to update the data.

Cointelegraph has reached out to Wiley about the cancellation but did not receive an immediate response.

The crypto community already harbored skepticism regarding the release of the book ever since the Celsius debacle. The tweet from Wiley has seemingly closed the book on such speculation.

Mashinsky is currently being sued by the New York Attorney General’s office, which announced a lawsuit on Jan. 5 alleging the ex-CEO defrauded investors out of billions worth of crypto.

It said his actions prior to Celsius declaring bankruptcy contributed to investor losses as he misrepresented Celsius’ financial condition and failed to follow regulatory requirements.

The crypto lender filed for Chapter 11 bankruptcy in July 2022 and has around 600,000 users with crypto frozen in Celsius accounts.

Just weeks before the company froze customer funds and declared bankruptcy, Mashinsky allegedly withdrew $10 million from the platform, raising questions on whether Mashinsky knew the company would be freezing funds and filing for bankruptcy.

In a 470-page report, a bankruptcy court-appointed examiner found on Jan. 31 that the platform used customer funds in a “very Ponzi-like” manner.

The examiner also documented how Mashinsky tried to personally exert control over the price of the platform’s native CEL token, an unsuccessful effort that led Celsius to use customer cryptocurrencies to fund its CEL buybacks, as it wasn’t earning sufficient yield.

celsius creditors