Celsius Creditors Decry 30% Payment Cut Amid $3 Billion Bankruptcy Case
Summary:
Creditor complaints are increasing against the bankrupt cryptocurrency lending firm Celsius, which owes over $3 billion in claims. These complaints stem from unpaid debts and a reported 30% or higher reduction in payment amounts from the original bankruptcy plan. This reduction is attributed to a Coinbase exchange rule which limits distributions to 100 Celsius corporate accounts. Many creditors were forced to accept cash repayments, severely reducing their anticipated payment value, especially considering the rise in the value of Bitcoin and Ether since these repayments were agreed upon.
Celsius, a cryptocurrency lending firm, now in bankruptcy and owing over $3 billion to its creditors, is in hot water as debts remain unpaid. A group of its creditors are reporting a reduction in payments by 30% or more compared to the initial bankruptcy plan. They attribute this drastic cut to a limit set by the Coinbase exchange, which only permits distributions to a maximum of 100 Celsius corporate accounts. Because of this, some creditors are being forced to take cash repayments as opposed to the agreed-upon cryptocurrency. With the increasing value of Bitcoin (BTC) and Ether (ETH), this change significantly reduces the anticipated payment value for all but the top 100 business accounts on Celsius.
An Australian creditor of Celsius, who wished not to be named, contacted Cointelegraph with a claim for 0.182 BTC and 3.05 ETH under the bankruptcy terms. Kirkland & Ellis, the law firm representing the Celsius debtors, informed this creditor their repayment would be $15,741 in cash, a 36% cut from the cryptocurrencies’ market value of $24,552 at the time. Emails provided by this anonymous creditor that were exchanged with Kirkland & Ellis clearly indicate a switch to cash repayments, falling short of the promised crypto value. Kirkland & Ellis suggested that the cut is a direct result of the Coinbase rule, limiting crypto payments to only 100 corporate accounts.
Several disgruntled creditors also took their complaints to United States bankruptcy Judge Martin Glenn, in charge of the case. One such pair, Jake and Sheri Faller from Oak Park, California, experienced a payment cut of 26% to 33%, deeming the Coinbase rule “unfair and not equitable”. Another creditor, Hong Kong resident Hui Ka Hin, also expressed his discontent, forced to accept US Dollar Distribution rather than the original agree-upon cryptocurrency.
The Celsius bankruptcy plan was confirmed by the Court on Nov. 9. The plan established two different crypto prices to calculate creditor payments, determined by the date of Celsius’ bankruptcy petition (July 13, 2022) and the “effective date” of distributions (Jan. 31, 2024). Added to this are other factors contributing to the reduction of payments, including a portion being paid to Ionic Digital mining company stock, a percentage in “illiquid assets recovery” at a future date and 20.8% simply not being paid as a result of insolvency at the time of the petition.
Finally, it is worth noting that the majority of the creditors are receiving cryptocurrency over U.S. dollars. For instance, a Celsius creditor who held 1 BTC and 1 ETH in their account when processing was halted would have seen their holdings amount to $20,969.17 on the petition date. But, because of various regulations, they would only receive 57.9% of that as payment, leaving the value at $12,141.15. This represents an 86% decrease in BTC and a 135% increase in ETH compared to what the creditor started with. According to the anonymous creditor who spoke to Cointelegraph, such was considered as "special treatment" for some creditors, a situation to which they claim to have never agreed. Regardless, this payout plan was passed with creditor consensus stating that payments in U.S. dollars would be made if a regulatory compliant distribution partner couldn't be found. In the meantime, Coinbase has yet to comment on the issue.
Published At
3/15/2024 5:00:00 PM
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