Celsius To Distribute Additional $127M From ‘Litigation Recovery Account’

Bankrupt crypto lender Celsius Network has announced plans to distribute an additional $127 million to creditors from its “Litigation Recovery Account.” The payout will be made to creditors in specific claim classes, as outlined in a recent filing.

Distribution Plan

The funds will go to those with claims in classes 2, 5, 7, 8, and 9, which include retail borrower deposits, general earn claims, withhold claims, unsecured loan claims, and general unsecured claims. Creditors eligible for the distribution will have the option to receive their payouts in Bitcoin or cash.

The distribution will follow the same methods used in August’s payout, including PayPal, Venmo, and Coinbase. Those without a verified account on these platforms will receive cash payments instead. Corporate claimants are also eligible, though convenience claims will not be included in the distribution.

Celsius Faces Legal Challenges

Following Celsius’s collapse in 2022, the company has faced significant legal challenges. Notably, former CEO Alex Mashinsky was arrested and charged with fraud in July 2023 for allegedly providing false information to depositors regarding the platform’s investment risks. The ongoing legal scrutiny underscores the broader context in which the recent distribution of funds to creditors is taking place.

In a recent development, a federal court rejected Mashinsky’s request to dismiss the fraud charges linked to the company’s downfall, leaving seven counts for him to face. His trial is scheduled for January 28, 2025, with a pre-trial hearing on January 16.

As part of its efforts to address the fallout from its bankruptcy, Celsius has filed a lawsuit against Tether, the issuer of the USDT stablecoin. Celsius claims that Tether mismanaged over $2 billion by using Bitcoin it held as collateral to settle Celsius’ outstanding loan, which worsened its financial troubles and contributed to the company’s collapse.

In January 2022, Celsius and Tether updated their agreement to require Tether to notify Celsius if collateral dropped below a certain level, allowing ten hours for a response. However, on June 12, Tether made two collateral demands in quick succession. Celsius argued that the second demand, which resulted in the sale of all 39,542.42 BTC at a steep discount in a “fire sale,” violated the agreed notice period.