US Court Approves Proof-of-Claim Deadline For Celsius Network Victims

• Proof of claim must be submitted by the customers of the defunct crypto lender no later than January 3, 2023.
• Crypto lending platform Celsius Network declared bankruptcy this year after a liquidity crisis plagued the industry.
• The independent examiner in the Celsius case said the firm had “insufficient” accounting and operational controls for customer funds.

The U.S. Bankruptcy Court for the Southern District of New York gave the bankrupt crypto lender Celsius the green light to set a deadline for users to file proofs of claim in the company’s ongoing bankruptcy proceedings.

The motion that Celsius filed, and that the U.S. Bankruptcy Court for the Southern District of New York approved last week, says that affected consumers have until January 3, 2023, to send proof of claim. Claims can be submitted to the claims agent, Stretto, via mail, in person, or on the website. This includes individuals, partnerships, corporations, joint ventures, and trusts.

Celsius created a post on Twitter reminding its former subscribers of the recently approved court deadline. They also detailed instructions on how to make claims. In addition, the Celsius app will send a notification to users.

Celsius Lacked Adequate Accounting and Controls for User Funds

The decision was reached not long after the independent examiner in the Celsius case concluded that the company’s administration of customer funds was subject to “insufficient” accounting and operational controls.

Authorities have been keeping a close eye on Celsius’s operations. Customers claimed that the defunct cryptocurrency lender utilized the assets of new users to cover existing yields and ease withdrawals. Thus, on November 1, the judge presiding over the case issued a judgment ordering an investigation into the plausibility of Celsius being a Ponzi scheme.

In July, Celsius Network went bankrupt, just a few weeks after putting limits on user withdrawals because of a liquidity crisis in the industry that had started earlier in the year. The lender has sought protection under Chapter 11 of the Bankruptcy Code in order to restructure while conducting business as usual.

The CEO of Celsius, Alex Mashinsky, resigned in September after being accused of being in charge of a string of bad trades at the beginning of 2022. A few weeks before the business stopped allowing withdrawals, in May, Mashinsky reportedly took as much as $10 million out of the company’s account.

On the Flipside

• A former investment manager at Celsius Network accused the company of fraud.
• Despite facing liquidity problems, Celsius, a different bankrupt cryptocurrency company, was able to pay back a large portion of its debt.

Why You Should Care

The recent developments in the Celsius bankruptcy proceedings follow the bankruptcy of yet another major cryptocurrency platform. Ex-users and investors who lost money in the current FTX scandal are yet another group at the mercy of authorities. 

Read more about the liquidity crisis facing the industry:

Nine Leading Crypto Exchanges Commit to Proof of Reserve Amidst FTX’s Liquidity Crunch

Celsius Faces Trouble Selling Its Stablecoins Amid CEO Resignation