Bankrupt crypto lender Celsius Network may finally see an end to its prolonged court battle with disgruntled customers after the company entered into a settlement agreement to address pending claims related to fraud allegations.
Based on a recent court document, a comprehensive settlement was reached with customers, addressing approximately 30,000 pending claims, totalling $78.2 billion. However, the main challenge for distributing these settlements by year-end is reconciling the claims, some of which involve fraud and misrepresentation issues.
If approved, account holders who choose not to opt out of the settlement will receive a 5% increase in their Account Holder Claims (excluding Custody Claims) as compensation for alleged damages resulting from the debtors’ misconduct under the former management team. The Settlement will also address the class claim and other account holder claims; the document disclosed.
And while the court document is still in the proposal stage awaiting further developments, a crucial decision on the approval of the settlements is expected on August 10, followed by a confirmation hearing on Celsius’ reorganization plan in October. Notably, if these legal processes proceed positively, customers may start receiving disbursements of cryptocurrencies and other assets before the year’s end.
Celsius Network’s journey into bankruptcy started approximately a year ago when it suspended all customer withdrawals following the implosion of FTX, making it one of the most notable crypto implosions to date. During its peak, the crypto lender boasted an impressive $30 billion in assets. However, by the time it filed for Chapter 11 bankruptcy on July 13, 2022, its assets had plummeted to approximately $4.7 billion worth of crypto assets.
Since filing for bankruptcy, Celsius Network has been entangled in a complex situation, as some customers have sought damages, alleging misconduct by former management. In contrast, Celsius’ lawyers have contended that customers are only entitled to their initial deposits.
Adding to Celsius Network’s legal woes, the Securities and Exchange Commission (SEC) recently filed a lawsuit against the company and its former CEO, Alex Mashinsky, for alleged fraudulent and unregistered sales, misleading investors, and price manipulation of a native token. On July 13, Mashinsky was reportedly arrested in New York with the US Department of Justice (DOJ) accusing the businessman of orchestrating a “years-long scheme to mislead customers.”
In a statement, however, the DOJ said that it would not prosecute Celsius in its capacity, as the company had taken responsibility for its involvement in the alleged fraudulent scheme and was actively cooperating with the authorities.
That said, the court approval for settlements and reorganization approaches, both the cryptocurrency community and Celsius Network’s customers are closely monitoring the developments. The resolution of these legal challenges will likely shape the company’s future trajectory and its efforts to rebuild trust and stability within the industry.