Celsius Files Motion for Distribution of Funds
The bankrupt crypto lending firm, Celsius, has filed a motion seeking relief for the distribution of funds resulting from the sale of GK8, a self-custody platform. The proposed settlement, agreed upon by the debtors, creditors’ committee, and initial consenting Series B preferred holders, suggests allocating $24 million for legal expenses, with the remaining $1 million to be divided among the holders. This settlement aims to avoid costly litigation and a lengthy confirmation process, benefiting the debtors’ creditors and providing certainty for all parties involved.
Background: Celsius and GK8
Celsius acquired GK8, a self-custody startup in Israel, for $115 million in late 2021. However, after filing for bankruptcy in mid-2022, Celsius sold GK8 as part of its restructuring plan. Galaxy Digital, led by Mike Novogratz, successfully acquired GK8 in late 2022, along with its expert team and Tel Aviv office.
Legal Issues Faced by Celsius
Aside from the bankruptcy, Celsius is currently facing multiple legal issues. The United States Securities and Exchange Commission (SEC) filed a lawsuit against Celsius and its co-founder and former CEO, Alex Mashinsky, on July 13, accusing them of securities fraud related to CEL and the Celsius Earn product. Meanwhile, Mashinsky was also arrested at the same time. Additionally, on the same day, the US Federal Trade Commission (FTC) imposed a $4.7 billion fine on Celsius. Mashinsky has pleaded not guilty and was released on $40 million bail.
Hot Take
The bankruptcy filing and ensuing legal issues have significantly impacted Celsius. With the motion for the distribution of funds, the company aims to provide some resolution and value to its creditors. However, the SEC lawsuit and FTC fine add further challenges for Celsius to overcome. It remains to be seen how the company will navigate these legal obstacles and regain its stability in the crypto industry.
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