Embattled Crypto Lender Celsius Escapes Chapter 11 Bankruptcy, To Distribute $3 Billion in Crypto to Creditors

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Crypto Company Terraform Labs Files for Chapter 11 Bankruptcy Protection

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Crypto custodian Prime Trust files for Chapter 11 bankruptcy

August 15, 2023 Coin Telegraph

Bankruptcy

The crypto custodian's bankruptcy comes as it's been unable to honor customer withdrawals for months.

Crypto custodian Prime Trust has filed for Chapter 11 Bankruptcy in Delaware after it faced a shortfall in customer funds.

The company said in an Aug.15 filing that it has between 25,000 to 50,000 creditors and estimated liabilities between $100 million to $500 million compared to $50 million to $100 million worth of estimated assets.

"The Company believes that the commencement of the Chapter 11 Cases will provide a transparent and value-maximizing process for the benefit of the Company’s clients and stakeholders," it said in an accompanying press release.

The firm's top five unsecured creditors have claims of roughly $105 million — $55 million of which is the largest unsecured claim reported by Prime Trust.

*Prime Trust's largest unsecured creditor has a claim for over $55 million. Source: Stretto*

Prime Core Technologies Inc., Prime Trust, LLC, Prime IRA LLC and Prime Digital, LLC were the entities listed as the entities filing for Chapter 11 relief.

Prime Trust's bankruptcy follows Nevada’s business regulator issuing the firm a cease and desist order on June 21 saying its financial condition was “critically deficient” and was unable to honor customer withdrawals.

Days later on June 26, Nevada's regulator petitioned a court to place the firm into receivership which the court approved on July 18.

Prime Trust agreed to the petition due to what it said was a “substantial deficit between its assets and liabilities.”

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FTX, Genesis reach in-principle agreement to settle bankruptcy case

July 28, 2023 Coin Telegraph

Bankruptcy

FTX and Genesis lawyers have sent a letter to the bankruptcy judge regarding a settlement agreement.

Bankrupt crypto exchange FTX and crypto lender Genesis have reached an agreement in principle to resolve the claims brought by FTX in its bankruptcy case.

On July 27, legal counsels for both firms sent a letter to bankruptcy Judge Sean Lane stating that they had agreed to a settlement.

However, the agreement was in principle and did not provide any details on the settlement.

Both firms are bankrupt and have been trying to collect money for creditors while under court supervision.

The settlement would resolve FTX’s claims against Genesis debtors and vice versa. It would also withdraw pending motions related to those claims. Both parties intend to document and seek court approval of the settlement promptly, it stated.

“The Parties have reached an agreement in principle, subject to documentation, regarding a settlement that would resolve, among other things, the claims asserted by the FTX Debtors against the Debtors in these Chapter 11 Cases and the claims asserted by the Genesis Debtors against the FTX Debtors in the FTX Chapter 11 Cases.”

To allow time to finalize terms, they requested the court adjourn upcoming deadlines on current motions and due briefs.

*Snippet from the letter in Case No. 23-10063. Source: Kroll*

FTX has previously claimed that Genesis, which is owned by Digital Currency Group, owed the bankrupt exchange as much as $4 billion . However, it reduced the amount to $2 billion, according to a letter sent to Judge Lane earlier this month.

Genesis filed for Chapter 11 bankruptcy protection in a New York bankruptcy court in January following the collapse of crypto hedge fund Three Arrows Capital.

The crypto lender is the largest unsecured creditor of FTX and its affiliates with $226 million owed, according to court filings.

In June, FTX debtors objected to Genesis' estimation that it was entitled to claims totaling zero, however, these claims and objections appear to have been settled with this latest development.

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

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FTX bankruptcy will be ‘very expensive’ but there’s a reason: Auditor

June 21, 2023 Coin Telegraph

auditor

The legal fees charged in the first months of FTX’s bankruptcy have been examined by an auditor, who has confirmed the case is “on track to be very expensive.”

Fees charged by the lawyers and the restructuring team working on the bankrupt crypto exchange FTX have topped $200 million in just over seven months, but an independent auditor argues it makes sense, given the mammoth task.

On June 20 the court-appointed fee examiner, Katherine Stadler, filed a 47-page report on the fees charged by the law firms in the roughly three months following FTX’s Nov. 11 bankruptcy and concluded they were not “wholly unreasonable in the moment.”

She remarked on the “largely unregulated financial system” in which FTX operates, adding the case was “remarkable” for the exchange’s “global scope, the complete absence of corporate records, and the non-existence of even the most basic corporate governance.”

FTX Professional Fees
This continues to be an extremely expensive case and the Estate has been petitioned for nearly $225mm over 5.5 months (with a couple small stragglers remaining).

March fees peaked at $1.6mm PER DAY!

Fortunately, April is trending positively downward. pic.twitter.com/eMTJC3R9Xr
— Mr. Purple ️ (@MrPurple_DJ) June 14, 2023

Stadler confirmed the team working on FTX had “requested more than $200 million in fees” since its November bankruptcy, adding:

“Notwithstanding the relative scope of the known asset pool, these proceedings appear on track to be very expensive by any measure.”

She gave a glowing review of the FTX restructuring team, saying she was “struck” by those who “sprung into action” to “begin transforming a smoldering heap of wreckage.”

“The fees incurred to date are remarkable, but so is the professionals’ performance.”

“Very few firms could have accomplished what these professionals accomplished in 90 days,” Stadler added.

Charging by the hour

Stadler’s report broke down the fees charged by the law firms in the first weeks after FTX filed for Chapter 11 bankruptcy.

It said hourly rates for the 242 lawyers on the case ranged from $388 to $2,165 and 46 lawyers were on more than $2,000 an hour.

New York-based law firm Sullivan & Cromwell has walked away with the biggest paycheck, having charged around $42 million in fees and expenses over that time.

Consultants Alvarez & Marshal were next in line, pocketing over $28 million in fees and expenses.

Previously, Cointelegraph analyzed the billings of the five firms involved in the proceedings and found they collectively invoiced over $100 million in the first quarter of 2023.

Stadler added some advice, saying “careful stewardship of administrative expenses will translate to a better outcome for creditors” along with a “cost-conscious and cost-effective” Chapter 11 process.

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Voyager app set to reopen for customer withdrawals as soon as June 20

June 15, 2023 Coin Telegraph

3AC

Customers will soon be able to load up the Voyager app and see how much will be available for withdrawal.

Cryptocurrency brokerage Voyager Digital is preparing to reopen its app and allow customers to finally withdraw their funds — nearly one year after it filed for Chapter 11 bankruptcy.

Voyager's bankruptcy plan administrator Paul Hage said in a June 14 court filing that around June 15 the Voyager app would be updated to show the amount available for withdrawal, and estimated that the withdrawal period would start somewhere between June 20 and July 5.

The bankruptcy plan was first approved in court on May 17 and will result in customers initially receiving 35.72% of their claims by withdrawing crypto through the Voyager app or in cash after 30 days.

Voyager Court adjourned for the day
Fee examiners findings approved by the judge
App will come back online on or around 15 June
Estimated window for withdrawals opening 20 June to 5 July
30 days to withdraw once window opens
all creditors will receive 35.72 initial…
— Neville (@neville_p) June 14, 2023

Within the filing, Hage also noted that bankrupt crypto hedge fund Three Arrows Capital still owes Voyager $650 million, so while this first tranche of withdrawals allows for just over 35% of customer funds to be withdrawn “the primary focus will shift to recovering additional assets that can be distributed to creditors” once the initial distribution is completed.

Additionally, an extra $445 million of customer funds could also be made available to creditors pending a final resolution of Alameda Research’s preference claim against Voyager, which is not expected to happen until at least mid-September 2023.

Meditation between @investvoyager and @FTX_Official is anticipated to not start until Fall 2023

Anything less than 100% return would be a devastating result for Voyager creditors! pic.twitter.com/Y6IDAOgeT7
— EthDaddy ‍☠️ (@ETHjuiced) June 14, 2023

After originally filing for bankruptcy on July 5, Voyager had submitted two prior bankruptcy plan proposals but both had fallen through.

The first of these was to the United States arm of FTX, FTX.US, but the $1.4 billion deal fell through after FTX filed for bankruptcy.

Subsequently a $1 billion deal with Binance.US also fell through after it backed out on April 25, citing a “hostile and uncertain regulatory climate in the United States.”

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Core Scientific moves for September bankruptcy exit, expects $46M boost

May 24, 2023 Coin Telegraph

Core Scientific moves for September bankruptcy exit, expects M boost

$46 million

Core Scientific said favorable market conditions have increased its liquidity position and its bankruptcy restructuring plan has been revised.

A restructuring plan for bankrupt Bitcoin (BTC) miner Core Scientific could be finalized by September and it expects to exit proceedings with an additional $46 million due to recent favorable market conditions.

In a May 22 filing in a Texas Bankruptcy Court, Core Scientific’s lawyers said its liquidity position has improved considerably since it filed for bankruptcy and as a result, it plans to file a reorganization plan in the near future.

The plan is currently being negotiated with key stakeholders, and according to the filing, the firm is “seeking to build as much consensus as possible” about how a new Core Scientific would look after emerging from its bankruptcy proceedings.

*The next steps in Core Scientific’s Chapter 11 proceedings. Source: Stretto*

A Chapter 11 bankruptcy allows a firm to continue operating until stakeholders are able to agree on a restructuring plan which could involve measures such as the downsizing of business operations to reduce debt or the liquidation of assets to repay creditors.

The firm pointed to decreasing power costs, increasing Bitcoin prices and an increase in the blockchain’s hashrate as the primary market factors contributing to its liquidity boost.

*Core Scientific’s initial liquidity estimates vs current. Source: Stretto*

On Dec. 21, 2022, when Core Scientific filed for bankruptcy, Bitcoin’s price was $16,904, according to CoinMarketCap. Since then, the price has shot up by over 60%, currently sitting at around $27,000.

Additionally, power prices have decreased by 24% since the petition date according to the filing, while the network hashrate has jumped by 54%.

As a result of more favorable market conditions, Core Scientific estimates it will have an additional $46 million in funds once a restructuring plan is finalized, despite delays in the bankruptcy proceedings.

The miner is also expecting a significant windfall from Celsius Network claiming the bankrupt crypto lender owes it some $11 million.

The two firms are currently engaged in a lengthy court battle that began on Oct. 19, 2022, when Core Scientific first accused Celsius of failing to pay its power bills.

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FTX seeks to claw back $4B from Genesis in a battle of the bankrupt

May 3, 2023 Coin Telegraph

FTX seeks to claw back B from Genesis in a battle of the bankrupt

Bankruptcy

The bankrupt crypto exchange wants to recoup billions from the bankrupt crypto lender claiming it was “instrumental” to FTX’s “fraudulent” business model.

Cryptocurrency exchange FTX is seeking to recover around $4 billion from similarly bankrupt crypto lender Genesis and a still-solvent British Virgin Islands-based entity — part of efforts to recover value for creditors.

In a May 3 court filing in a New York Bankruptcy Court, lawyers for FTX sought $1.8 billion in loans and a $273 million collateral pledge allegedly given to Genesis from FTX’s sister trading firm Alameda Research.

FTX is also seeking to claw back $1.6 billion in withdrawals allegedly made by Genesis and a further $213 million purported to be withdrawn by its BV-based entity GGC International from the exchange before it collapsed into Chapter 11 bankruptcy on Nov. 11.

FTX moves to claw back $3.9 billion from Genesis.

1. $2.1 billion loan repayments/collateral pledge
2. $1.8 billion FTX exchange withdrawals pic.twitter.com/1SsW8yoPck
— FTX 2.0 shareholder (in spe) (@AFTXcreditor) May 3, 2023

The filing claims Genesis was “largely repaid” its nearly $8 billion in loans made to Alameda, “unlike other FTX creditors and customers.”

FTX alleged the bankrupt lender was “one of the main feeder funds for FTX and instrumental to its fraudulent business model.”

The exchange’s lawyers are seeking the clawback under bankruptcy laws that allow it to recoup “avoidable transfers” that occur in a 90-day period before a company declares bankruptcy.

Previous clawbacks by FTX have focused on $3.2 billion in payments made to its former executives, a $460 million investment made by Alameda into venture capital firm Modulo Capital and around $93 million in political donations made by founder Sam Bankman-Fried and other former top brass.

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Gemini ‘supportive’ of Genesis mediation, but frustrated over pacing

May 1, 2023 Coin Telegraph

Bankruptcy

Genesis is starting a 30-day meditation with its key creditors as its bankruptcy proceedings are close to hitting the four-month mark.

Crypto lender Genesis and its key creditor group have agreed to a 30-day mediation process in an attempt to move forward with a final restructuring plan, though one company is expressing "frustration" over the pace of progress.

On April 30, Gemini tweeted that Genesis, its parent company Digital Currency Group (DCG), its Unsecured Creditors Committee (UCC) and Gemini have agreed to a 30-day mediation process in court on April 28.

Gemini said its aim is to "drive to a final resolution as soon as possible, and that it was "supportive" of mediation. Gemini however added it had “expressed our frustration” regarding “the pace of progress among the parties and the need for urgency.”

2/ Gemini is supportive of mediation and working with the parties to bring this to a conclusion. We have also expressed our frustration on the record on the pace of progress among the parties and the need for urgency. The next status conference with the Court will be on May 4th.
— Gemini (@Gemini) April 30, 2023

The mediation is to move forward on a proposed bankruptcy exit plan submitted in February that expected creditors to recover 80% of lost funds. The plan is backed by DCG but the UCC opposed the restructuring deal wanting better terms.

Genesis is slated to next appear in bankruptcy court on May 4. Sean O’Neal, a lawyer for Genesis, said in court on April 30 that it hopes to have two mediation sessions before May 8 with the deal's final terms made public after the mediation period.

A mediator will need to be selected by Genesis and the UCC. O’Neal said potential mediators have started to be contacted and the process will be outlined to the court once one is selected.

On April 25, DCG expressed its thoughts on the matter when Genesis filed its motion for mediation.

DCG Statement on Genesis filing Motion for Mediation: pic.twitter.com/pRluUnL49C
— Digital Currency Group (@DCGco) April 25, 2023

The crypto conglomerate said the settlement would “prolong the court process” due to the renewed demands and added it was “difficult to understand the rationale” of Genesis creditors as they had given “limited engagement” since the plan proposed in February.

Genesis filed for Chapter 11 bankruptcy in a New York District Court in January, estimating its liabilities were between $1 billion and $10 billion with assets in the same range.

The crypto lender was one of several firms hit by liquidity issues in the wake of the collapse of FTX.

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Binance US Pulls the Plug: Voyager Purchase Deal Falls Through

April 25, 2023 Bitcoin.com

Chapter 11

Charging by the hour

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