Celsius Network, the now-defunct crypto lender, has recently taken a pivotal step in rebuilding trust and relieving its creditors. In a court document filed on Wednesday, Celsius Network announced a second distribution of $127 million to creditors.
This significant development marks a notable effort in Celsius’s recovery plan after it faced a catastrophic collapse in 2022. This payout brings creditors closer to recovering some of their claims, though the road to full restitution remains uncertain.
Celsius’s Second Payout: A Glimmer of Hope for Creditors
This week’s court filing revealed that Celsius will provide eligible creditors with a combined recovery of about 60.4% of their claims. Payments will be made in liquid cryptocurrency or cash, depending on each creditor’s eligibility and access to the designated distribution agent.
The filing clarified that bitcoin payouts would be calculated using a weighted average distribution price of $95,836.23 per Bitcoin (BTC). This move highlights Celsius’s structured approach to standardizing this process. For those unable to receive cryptocurrency, Celsius has arranged to provide equivalent payments in cash, ensuring every creditor is included.
Celsius’s First Distribution Set the Stage
Earlier this year, Celsius initiated its first distribution, distributing over $2 billion of cryptocurrencies. This payout reached over 171,000 creditors, covering 57.65% of eligible claims and offering some relief.
However, it barely addressed the immense financial damage caused by the company’s collapse. The second payout is to build on these efforts, but the road to full recovery remains long and uncertain.
Celsius filed for bankruptcy in July 2022 after a shocking $1.2 billion deficit in its balance sheet left it unable to fulfill its obligations. The company officially exited bankruptcy this year, setting up a long-term plan to restore value to creditors. However, the ongoing legal battles against the company and its executives continue to delay the process.
As Celsius works through its bankruptcy plan, creditors are left hoping for more distributions to close the gap in their claims. While this $127 million payout marks progress, many are still far from being made whole.
Celsius’s CEO Faces Intense Legal Heat
While Celsius works on repayment, its former CEO, Alex Mashinsky, is fighting to clear his name. The Securities and Exchange Commission (SEC), Federal Trade Commission (FTC), and Commodity Futures Trading Commission (CFTC) have all filed lawsuits against the company and Mashinsky.
He was accused of fraud and misleading customers about the risks of investing with Celsius. These multiple legal proceedings could see him serve a maximum prison sentence of 115 years. Adding to his woes, a U.S. district judge recently denied his motion to dismiss two fraud charges, further complicating his legal defense.
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