Celsius Network, the defunct crypto lender, is trying to merge its UK and US corporations, according to recent court documents, claiming that any apparent differentiation between the two firms was a “sham.”
The key point of contention is centered on a decision taken by the crypto lender in June 2021, when Celsius Network Limited (CNL) received a warning from the UK’s Financial Conduct Authority to halt operations in the nation.
To escape repercussions, CNL established a Limited Liability firm — Celsius Network LLC — in the state of Delaware and attempted to transfer its assets to the new firm. According to the now-bankrupt crypto firm’s May 1 court statement, the move of the two organizations “resulted in intercompany chaos.” According to the petition, official paperwork of the intercompany connection was “not completed for several months” and when it was, “it remained ambiguous” whose transactions the agreements covered.
According to the filing, the outcome of this transfer was too convoluted for ordinary investors to understand; nevertheless, more “sophisticated” Series B investors were fully aware of the ramifications of such questionable record keeping.
As a consequence, in later bankruptcy proceedings, the two businesses should be recognized as one and the same, so that smaller creditors are not overlooked in favor of Series B investors when it comes to the recovery and restitution of lost monies.
According to a concurrent court filing by the Celsius Official Committee of Unsecured Creditors (UCC), the migration was a “sham” and the procedures that permitted the transfer of billions of dollars in assets between the two were most likely fraudulent.
Simon Dixon, who reportedly lost more than $8.8 million in Bitcoin $28,495 as a result of the Celsius collapse, summarized the UCC filing on May 2 in a series of tweets, saying “Celsius acted as if the migration never occurred” and was given “poor documentation” and “no clear distinctions” to distinguish between the two entities.
Chief U.S. Bankruptcy Judge Martin Glenn determined in a March 9 memorandum ruling that consumers only have rights against Celsius’ Delaware-based LLC, implying that Series B investors are more likely to be compensated.
The auction of the remaining Celsius assets is due to go place on Wednesday, May 3, with a number of prominent corporations bidding for custody of the bankrupt firms’ assets, including exchanges Coinbase and Gemini.
NovaWulf Digital Management is now the “stalking horse bidder,” a phrase used to characterize the initial bidder who sets the standard for subsequent bids. NovaWulf’s plan is for a direct financial commitment of $45 million to $55 million. Customers might expect to recover up to 70% of their payments if NovaWulf’s request is approved.
The auction is a critical step forward in the recovery of monies for Celsius’ customers, who filed for Chapter 11 bankruptcy protection on July 14, 2022.