Celsius Bankruptcy Saga: $2.5 Billion Repaid, But Challenges Remain
In a significant development for the cryptocurrency industry, bankrupt crypto lender Celsius has made substantial progress in repaying its creditors, distributing approximately $2.53 billion to over 251,000 individuals. This repayment, which began in January 2024, represents about 93% of the eligible funds owed and encompasses roughly two-thirds of the company’s creditors.
Celsius, once a major player in the crypto lending space, filed for bankruptcy in July 2022 after a series of market downturns led to a $1.2 billion deficit in its balance sheet. At its peak, the company boasted 1.7 million users and managed assets worth $25 billion.
The repayment process, approved by a Delaware bankruptcy court in November 2023, involves a complex distribution of cash, cryptocurrency, and shares in a new entity called NewCo. This new company, backed by $450 million in seed funding, is set to focus on Bitcoin mining and staking operations.
While the progress is noteworthy, challenges persist. Approximately 121,000 creditors have yet to claim their funds, with many owed smaller amounts. The court filing reveals that about 64,000 creditors are due less than $100, while 41,000 are owed between $100 and $1,000. The court acknowledged that these smaller creditors “may not be incentivized to take the steps needed to successfully claim a distribution.”
The distribution process has been described as “the most complicated and ambitious” ever attempted in a Chapter 11 case. Complications have arisen from various factors, including creditors not reading emails, failing to redeem claim codes, and difficulties in passing KYC/AML checks for accounts with PayPal or Coinbase.
Adding to the complexity, Celsius recently filed a lawsuit against stablecoin firm Tether, claiming $2.4 billion in Bitcoin was improperly liquidated before its bankruptcy. Tether has dismissed the suit as a “shakedown.”
As the Celsius bankruptcy saga continues to unfold, it serves as a stark reminder of the volatility and risks associated with the cryptocurrency market. The case highlights the need for robust regulatory frameworks and risk management practices in the rapidly evolving digital asset space.
