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Home»BLOCKCHAIN NEWS»Bankrupt Celsius pays $2 billion worth of cryptocurrency to creditors
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Bankrupt Celsius pays $2 billion worth of cryptocurrency to creditors

By Crypto FlexsFebruary 17, 20243 Mins Read
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Bankrupt Celsius pays  billion worth of cryptocurrency to creditors
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Bankrupt cryptocurrency platform Celsius has allocated $2 billion worth of cryptocurrency to thousands of creditors.

The distribution, facilitated through PayPal and Coinbase, forms part of Chelsea Network’s ongoing strategy to address its obligations to creditors.

Celsius repays creditors

In a recent court filing, Chicago-based Chelsea law firm Kirkland & Ellis shared an update on the distribution of creditor funds outlined in the restructuring plan. This development comes after Celsius declared bankruptcy, exiting insolvency proceedings that began in July 2022.

Kirkland & Ellis said cryptocurrency distribution to U.S. holders will occur through PayPal, with Coinbase acting as a distribution agent for international holders. The legal team confirmed that $2 billion worth of cryptocurrency assets, including 20,255.66 Bitcoin and 301,338.77 Ether, were transferred to creditors.

Distributing cryptocurrency to most creditors instead of cash, as is typically the case in Chapter 11 bankruptcy, “accelerated the speed of distribution,” the filing states.

The debtor “successfully initiated a global distribution process to hundreds of thousands of creditors without experiencing significant operational or security challenges.
“It’s a problem,” the lawyer explained.

Account holders who have not agreed to a plan of restructuring will not be entitled to any distribution of funds until their claims are resolved.

It also highlighted that certain account holders may have difficulty receiving distributions if Coinbase or PayPal detect anti-money laundering (AML) or compliance issues.

The filing also made clear that distribution agents have the discretion to refuse distribution to anyone they believe does not meet compliance and other requirements.

Celsius file Chapter 11

On July 13, 2022, Chelsea Network LLC, a cryptocurrency lending and lending platform that manages approximately $25 billion in customer assets, filed for Chapter 11 bankruptcy.

That same day, the company’s founder and former CEO, Alex Mashinsky, was arrested and charged with multiple crimes, including securities, commodities, and wire fraud.

The charges allege that Mashinsky and key executive Roni Cohen-Pavon engaged in a complex financial scheme, intentionally misrepresented the company’s business model, and misrepresented the value of CEL, Celsius’ proprietary crypto token. Accused of manipulating .

Additional claims allege that Mashinsky misled the company’s customers by portraying it as a bank while operating it as a risky investment fund.

Additionally, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission each filed civil lawsuits against Mashinsky and Celsius based on similar grounds.

As part of the settlement with the Federal Trade Commission (FTC), the company agreed to pay a $4.7 billion fine to repay creditors. The settlement ranks as one of the largest in FTC history and highlights what the FTC describes as repeated deception by Celesius and Mashinsy.

Mashinsky’s arrest and indictment has brought some relief to creditors, but some in the industry are concerned about the underlying attitudes that fueled the platform’s rapid growth and subsequent collapse.

Mashinsky has pleaded not guilty to seven felonies, including securities fraud, wire fraud and conspiracy to commit fraud.

He was released from custody on $40 million bail. However, the case is still ongoing. Masinsky, who resigned as CEO in September 2022, is expected to go to trial on September 17.

On January 5, Celsius announced its intention to unstake its existing Ethereum (ETH) holdings, which have been generating significant staking reward returns for the asset.

The public Ethereum is intended to handle various costs incurred during the restructuring process and accelerate distribution to creditors.

Chelsea’s bankruptcy and legal action against Mashinsky have reverberated throughout the cryptocurrency industry, highlighting the importance of transparency, accountability, and regulatory compliance.

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