Bankrupt Celsius to spend $24M from GK8 sale on legal expenses

After buying GK8 for $115 million in 2021, Celsius is selling it for $25 million, spending 96% of the sale proceeds on legal fees.

Bankrupt cryptocurrency lending firm Celsius has requested the court to grant relief in the motion related to the distribution of funds from its sale of the self-custody platform GK8.

The Celsius Network’s debtors on July 17 submitted a filing stating that its Series B holders have agreed on a settlement to distribute $25 million from the proceeds of GK8’s sale.

The agreement was reached between debtors, the creditors’ committee and the initial consenting Series B preferred holders.

According to the document, the shareholders proposed allocating $24 million for legal expenses and the remaining $1 million to be distributed among the holders.

“In light of the fact that the primary purpose of the settlement is to reduce administrative costs, the debtors agreed to and remain supportive of the proposed allocation, which provides the initial consenting Series B holders with reciprocal benefits,” the filing reads.

According to the court document, the settlement agreement was borne out of the “mutual desire” to avoid costly litigation and a lengthy confirmation process with a corresponding increase in professional fees. The filing notes:

“The settlement not only unlocks tremendous value for the debtors’ creditors but also affords the debtors and all parties priceless certainty of the way forward. For the reasons set forth herein and the motion, the court should overrule the objections and grant the relief requested in the motion.”

As previously reported, Celsius acquired the Israeli self-custody startup GK8 in late 2021 for $115 million. The troubled crypto lender was soon forced to sell GK8 as part of its restructuring plan following Celsius’ collapse in 2022.

Related: Former Celsius CEO Alex Mashinsky reportedly arrested

In late 2022, Mike Novogratz-led investment firm Galaxy Digital won the bidding to buy GK8. As part of the acquisition, Galaxy acquired GK8’s team consisting of 40 experts, including cryptographers and blockchain engineers, alongside an office in Tel Aviv. In July 2023, GK8 hosted a meeting with financial executives in its New York offices.

We were thrilled to host in our NYC offices top executives representing the biggest financial institutions in the USA who are in charge of trillions of dollars and leading the future of digital assets.#NYC #digitalassets #Tokenization #blockchaintech pic.twitter.com/DEte55oavP

— GK8 (@GK8_Security) July 17, 2023

The news comes as Celsius tackles a series of legal issues in mid-July. On July 13, the United States Securities and Exchange Commission filed a lawsuit against Celsius, which accompanies reports on the arrest of the former CEO Alex Mashinsky. The U.S. Federal Trade Commission also issued a $4.7-billion fine against Celsius the same day.

Mashinsky pleaded not guilty to charges of misleading customers and inflating the CEL token, and was subsequently released on bail of $40 million.

Magazine: Should you ‘orange pill’ children? The case for Bitcoin kids books