Celsius wants to extend the deadline for claims as lawyer fees mount

December 29, 2022 Coin Telegraph

Administrative expenses from the bankruptcy proceedings have already topped $53 million, and continued delays are chipping away at Celsius’ estate.

Bankrupt crypto lender Celsius Network is planning to file a motion that would extend the deadline for users to submit their claims by another month.

The crypto community has started to grow impatient, noting that Celsius’ lawyer fees have continued to stack up and are eating away at the lender's estate.

In a Dec. 29 tweet, Celsius announced that it would seek to extend the current deadline for claims from Jan. 3 to early February.

The bankruptcy court is set to hear the motion on Jan. 10, and according to Celsius, the Jan. 3 deadline will be extended until at least then.

Celsius is preparing to file a motion later this week requesting an extension of the bar date, which is the deadline to file a claim, from January 3, 2023, until early February.
— Celsius (@CelsiusNetwork) December 29, 2022

The claims process allows creditors who believe they have a right to payment to file claims during bankruptcy proceedings. Celsius’ creditors had made over 17,200 claims as of Dec. 29.

However, Celsius’ creditors appear antsy as Celsius’ administrative fees have continued to rack up since it first filed for bankruptcy in July. A Dec. 27 Financial Times report noted that the fees charged by bankers, lawyers and other advisers in the bankruptcy case had already reached $53 million.

As an example, a Dec. 15 fee statement from one of the law firms representing Celsius, Kirkland & Ellis, requested a fee of over $9 million for work done during the months of September and October.

In comparison, only $44 million has so far been earmarked by Celsius to be returned to customers. This money belongs to users who only ever held funds within the Custody Program, and represents a minority of the $4.72 billion of user deposits held by Celsius.

Some in the crypto community have been unimpressed with the latest postponement in the proceedings, alleging that it’s yet another “delay tactic.” For example, one user noted “Stop wasting time stop extending, just go on with proceedings and give me my money back!!!!” while another simply said: “Stop wasting time and my money.”

So the lawyers get millions but I wonder what us small fry folks get?
— Chris (@browncoat1of1) December 29, 2022

Global investment platform BnkToTheFuture founder Simon Dixon, who has been an active voice in the Celsius bankruptcy proceedings, noted in a Dec. 23 tweet that by the time users are able to get their funds back from Celsius, they should only expect around to receive around hal what they put in.

Prepare yourself for 50% in 6 months with #Celsius Chapter 11 to manage your expectations | Focus on your family over XMas & rebuilding in 2023. https://t.co/E0WeDuPem0
— Simon Dixon (@SimonDixonTwitt) December 23, 2022

At the behest of Celsius, the U.S. trustee, and the unsecured creditors’ committee, judge Martin Glenn appointed fellow judge Christopher Sontchi to be a “fee examiner” on Oct. 20. His job is to negotiate and approve the fees set by lawyers and other professionals in the case.

The fee examiner is also being paid out of Celsius’ estate, with the latest fee statement submitted on Dec. 21 requesting just under $20,000 for work done during November.

Judge orders probe to investigate whether Celsius was a Ponzi

November 2, 2022 Coin Telegraph

Celsius

The Federal judge overseeing the Celsius case has asked for an investigation to look into whether the firm acted like a Ponzi scheme and has asked for additional details before approving a $3 million bonus scheme.

The judge overseeing the Celsius bankruptcy case has ordered the examiner and the official committee of Celsius creditors to determine who will head a probe into whether the firm was operating like a Ponzi scheme.

The order during the Nov. 1 hearing comes in response to allegations from customers that Celsius had used assets of new users to pay yields and facilitate withdrawals to existing users, and as a result, fits the legal definition of a Ponzi scheme.

The judge had approved the appointment of an independent examiner on Sep. 9 to look into aspects of Celsius’ business following calls for greater transparency into its operations, such as its tax payment procedures and why some customers were moved to different accounts.

It is not the first time the embattled lender has been accused of operating like a Ponzi scheme, with decentralized finance (DeFi) protocol KeyFi having alleged that Celsius acts like one when it sued Celsius on Jul. 7.

Celsius had filed for chapter 11 bankruptcy on Jul. 13, citing a crash in crypto values and poor asset deployment decisions, and the case has been proceeding through the court system since.

In the Nov. 1 hearing, the Federal judge, Martin Glenn, also told Celsius that they would have to include more details in its Oct. 11 motion to pay nearly $3 million to 62 employees as part of a key employee retention plan (KERP), with Law360 quoting the judge as saying:

“I was shocked when I saw the redactions. I had never seen anyone try to redact everything,”

Glenn is referring to a section within the motion that outlines the participants of the bonus, where every detail relating to the individuals available to the public had been redacted, including their salaries and job descriptions.

The U.S. Trustee had filed an objection on Oct. 27 to the KERP, taking issue with the lack of identifiable metrics within the motion to warrant such an expensive bonus scheme and that it prevented interested parties from arguing whether some participants could be considered insiders and therefore ineligible for a KERP.

Celsius bankruptcy case Trustee slams $3M employee bonus motion

October 28, 2022 Coin Telegraph

Celsius

The Trustee has objected to the retention bonus, citing a lack of sufficient information within the motion to warrant such a high payout and a lack of clarity around whether any recipients should be considered insiders.

The U.S. Trustee overseeing the Celsius chapter 11 bankruptcy case, William Harrington, has objected to a Celsius motion that would see 62 of its 275 employees paid a retention bonus totaling $2.96 million.

The Trustee has blasted Celsius in its supporting statement for the objection filed on Oct. 27, noting:

“It defies logic, not to mention the Bankruptcy Code, that a company where the majority of its functions are no longer providing services, would now propose a multi-million dollar bonus scheme.”

For the “bonus motion”, as it is aptly named, to receive approval, the Trustee claims that Celsius must show that the bonuses are reasonable based on the facts of the case. Without any identifiable metrics, the Trustee says Celsius has failed to do so.

While the objection does not infer that Celsius employees are not deserving of an essential employee retention program (KERP), it points to the information provided by Celsius as being insufficient to justify such a high amount.

KERPs are designed to motivate employees to advance a successful restructuring outcome. While adding to executive pay ahead of a potential restructuring may seem counterintuitive, it can often be in the best interest of stakeholders.

Unlike the personal information of Celsius creditors, details of the KERP recipients have been kept out of the public eye, with an unredacted breakdown provided only to the court, the Official Committee of Unsecured Creditors, and the Trustee.

The Trustee has taken issue with that as well, claiming other interested parties are unable to argue whether the participants could be considered insiders, which would render them ineligible for a KERP.

Celsius had filed the bonus motion on Oct. 11, with a hearing on the proposal and related relief set to take place on Nov. 1.

Meanwhile, the lender is also being blamed for causing financial distress at Bitcoin (BTC) miner Core Scientific, who claimed on Oct. 19 that Celsius has refused to pay its bills since it filed for chapter 11 bankruptcy on Jul. 13, resulting in Core Scientific losing approximately $53,000 per day.

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Celsius bankruptcy judge gives the nod for independent examiner probe

September 15, 2022 Coin Telegraph

BnkToTheFuture

Following a motion in August, U.S. Bankruptcy Judge Martin Glenn has signed off on a request to appoint an examiner in the Celsius case.

A federal judge overseeing crypto lender Celsius’ bankruptcy case has given the green light for the motion to appoint an independent examiner to investigate aspects of Celsius’ business.

In an order dated Wednesday from the United States Bankruptcy Court of the Southern District of New York, the order notes that the examiner’s investigation will look into Celsius’ digital assets, tax payment procedures and the current status of its mining business following calls for greater transparency.

The examiner will also look into why there was a change in account offerings in April, resulting in some customers being moved from the Earn Program to Custody Services while others were moved to a “Withhold Account.”

The U.S. Trustee had previously referred to a lack of transparency around these accounts, with customers unaware of who holds what account and why. This may be important given Celsius had asked the court to return assets to “custody clients,” but not its “earn-and-borrow” clients.

A motion to appoint an examiner originally came from an Aug. 18 filing from the United States Trustee handling Celsius’ bankruptcy proceedings, citing “significant transparency issues” surrounding Celsius’ business operations.

However, BnkToTheFuture CEO Simon Dixon said the scope of the examiner’s investigation was pared down since the motion was initially filed so that Celsius doesn’t run out of money.

He also noted that Celsius Network CEO Alex Mashinsky would need to provide information on his withdrawals from the platform before the freeze.

CELSIUS HEARING LIVE; @CelsiusUcc legal council going over the examiner motion & reducing the scope so that @CelsiusNetwork doesn't run out of money. They said @Mashinsky to provide information on his withdrawals from the platform before the freeze.
— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) September 14, 2022

The latest order also outlined that the scope of the investigation could be expanded if deemed necessary, but would require consultation with Celsius and the official committee of unsecured creditors.

Celsius will be required to produce all documents the examiner “reasonably deems relevant to perform the Investigation, though Celsius will have grounds to reject a request, which would then be decided by the courts.

Once the identity of the examiner has been approved, they will have seven business days to produce a work plan and budget.

The court will then have seven days to approve these, after which the examiner will have 60 days to complete their investigation.

Celsius filed for Chapter 11 bankruptcy and froze withdrawals in July. Since then, some depositors have been told their funds will be released, but most are still unable to access their assets with no guarantee they will ever receive them.

It seems as though the Examiner will be very busy once they are appointed, with Dixon also tweeting that the U.S. Trustee already has forty parties ready to be interviewed.

CELSIUS HEARING LIVE; @CelsiusUcc legal council opposed to Trustee takeover as they think it may lead to liquidation which is undesirable. Examiner preferred. US Trustee has 40 parties ready to interview for examiners next week.
— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) September 14, 2022