Celsius Creditors Committee Denies Rejected Bids, Slams Mashinsky’s Deception

The Celsius Network saga continues to unfold, and the latest chapter involves a crucial clarification from the Official Committee of Unsecured Creditors (UCC). Just after examiners released their findings, the committee convened a two-hour town hall to address swirling rumors, particularly regarding the bids for Celsius’ crypto assets. Let’s dive into what was revealed and what it means for Celsius account holders.

Were Celsius Asset Bids Really Rejected? The Creditors Committee Sets the Record Straight

Recent reports suggested that offers for Celsius’ crypto assets had been turned down, causing concern and uncertainty in the already tense situation. However, attorneys representing the official creditor committee, Gregory Pesce and Aaron Colodny from White & Case LLP, firmly dismissed these claims during a Twitter Space town hall on January 31st. This online meeting followed the release of the examiner’s report on Celsius’s operations and financial health.

“The allegation that the bids were rejected is untrue,” stated Pesce, aiming to dispel the misinformation that had been circulating. This denial is significant because it directly contradicts earlier suggestions that potential buyers had been turned away.

The confusion seems to stem from a Substack article by Katherine Fong, published on January 27th. Fong’s article mentioned interest from at least five entities in bidding for Celsius’ assets:

• Binance
• Bank To The Future
• Galaxy Digital
• Cumberland DRW (crypto trading firm)
• NovaWulf (digital asset investment firm)

At the time of her report, Fong indicated that these bids were largely “abandoned,” referencing a Celsius lawyer’s prior statement that initial proposals were “not persuasive.” However, the UCC counsel clarified that this earlier statement was misinterpreted and didn’t mean bids were rejected outright.

“The bids have not been rejected. That’s just wrong, and I hope I can disabuse people of that incorrect notion today.”

While the attorney didn’t confirm the accuracy of the leaked list of bidders, he expressed regret about the leak itself. Why? Because it potentially weakens the committee’s negotiating position. In bankruptcy proceedings, maximizing returns for creditors is paramount, and a competitive bidding process is crucial for achieving this.

Playing the Field: Strategy Behind Investor Communications

Pesce explained the committee’s strategic approach to engaging with potential investors:

• Regular Communication: The debtors and the committee are in constant contact with potential investors, both publicly and privately.
• Strategic Messaging: Communications are carefully crafted to encourage competition among interested parties.
• Maximizing Recovery: The ultimate goal is to “play different parties against one another” to secure the highest possible recovery for Celsius account holders.

The success of this bidding process is directly tied to the amount of funds that will eventually be returned to Celsius users. Therefore, any action that could compromise this process is viewed negatively by the committee.

The “Regrettable Leak” and Accusations of Self-Promotion

The attorney didn’t mince words about the leaked information, calling it “regrettable.” He further suggested that the source of the leak, referring to Katherine Fong, had “monetized it for marketing her paid-for content page on Patreon.” This accusation implies that the leak was strategically timed to drive traffic and subscriptions to Fong’s content platform.

Fong responded to these charges, clarifying that the leaked bid information was actually freely accessible and not behind a paywall. She pointed out the “odd charge” considering the information’s availability.

Indeed, a check confirmed that the details of the five bids mentioned in her Substack article remained accessible without any payment requirement at the time of writing. This raises questions about the accuracy of the attorney’s accusation regarding a paywall.

Investigating the Leak and Concerns of Investor Influence

Pesce revealed that the committee is actively investigating the source of the leak. A key concern is the possibility that an investor involved in the bidding process might be attempting to manipulate the situation for their own advantage. This adds a layer of intrigue and potential complication to the already complex bankruptcy proceedings.

Despite the leak and its potential ramifications, Pesce reassured stakeholders that efforts are underway to mitigate its impact and expedite the bankruptcy process. “We’re attempting to limit the leak’s impact,” he stated, emphasizing the commitment to moving forward efficiently.

Examiner Findings and Damning Accusations Against Mashinsky

The UCC attorneys also addressed the recently released examiner’s findings, and their tone was unequivocally critical of Celsius’s former leadership, particularly Alex Mashinsky.

Colodny delivered a blunt assessment: “What Mr. Mashinsky and several staff members did was wrong. Mr. Mashinsky deceived us.” The accusations go further, alleging that Celsius’s team even went as far as editing videos to conceal Mashinsky’s misrepresentations.

“They put themselves ahead of the company, and they put themselves ahead of the account holders more importantly.”

This strong condemnation from the creditor committee’s legal representatives underscores the severity of the examiner’s findings and the depth of the alleged mismanagement and misconduct at Celsius.

Pathways to Recovery: What’s Next for Celsius?

Looking ahead, the UCC attorneys outlined several potential recovery strategies being considered. These options indicate the multifaceted approach being taken to salvage value for creditors:

• Creating a “Recovery Organization”: This could involve establishing a new, publicly listed entity to manage and distribute recovered assets.
• Selling Mining Equipment: Liquidating Celsius’s mining hardware to generate funds.
• Winding Down Celsius: A complete shutdown of Celsius’s operations.
• Transferring Crypto to a Third Party: Partnering with another company to manage and potentially distribute the remaining cryptocurrency assets.

The chosen path will significantly impact the timeline and extent of recovery for Celsius account holders. The committee’s ongoing investigations and negotiations with potential investors will be crucial in determining the most viable and beneficial course of action.

In Conclusion: Navigating a Complex Path to Recovery

The Celsius bankruptcy case is a complex web of financial distress, legal proceedings, and now, accusations of deception and strategic leaks. The creditor committee’s firm denial of rejected bids and strong criticism of former CEO Mashinsky highlight the ongoing efforts to maximize recovery for account holders while navigating a challenging and often opaque process. As Celsius moves forward, the focus remains on uncovering the truth, securing the best possible outcome for creditors, and learning valuable lessons from this high-profile crypto collapse.