Celsius Shareholders File to Stake Their Claim for Bankruptcy Payouts

A motion filed by lawyers says the Celsius bankruptcy is “all about the customers” and “without regard for the equity holders.”

AccessTimeIconSep 23, 2022 at 11:01 a.m. UTC
Updated May 11, 2023 at 5:53 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Holders of preferred equity in failed cryptocurrency lender Celsius Network want to make sure they’re at the table in talks on clawing back their investments, as well as first dibs on proceeds from the sale of certain assets, saying they are worried the bankruptcy process is overly focused on retail customers.

Law firm Milbank LLP filed a motion in the bankruptcy court for the Southern District of New York to appoint a Preferred Equity Committee to represent Series A and Series B shareholders, and to place them at the front of the queue when it comes to the sale of custody firm GK8 and the Celsius mining operations.

  • DCG Reaches In-Principle Deal With Genesis Creditors
    DCG Reaches In-Principle Deal With Genesis Creditors
  • Crypto Custodian Prime Trust Files for Bankruptcy
    Crypto Custodian Prime Trust Files for Bankruptcy
  • Celsius Can Start Converting Altcoins to Bitcoin, Ether as of July 1, Judge Says
    Celsius Can Start Converting Altcoins to Bitcoin, Ether as of July 1, Judge Says
  • FTX’s Bankruptcy Fees on Track to Be 'Very Expensive', Court Examiner Says
    FTX’s Bankruptcy Fees on Track to Be 'Very Expensive', Court Examiner Says
  • “Not only is the UCC [Unsecured Creditors Committee] laser focused on maximizing value for the customers, without regard for the Equity Holders, but the Debtors also have made it abundantly clear that the UCC is their partner, and these cases are all about the customer,” the statement said.

    The lawyers said a fiduciary is needed to take the equity holders’ side of the dispute before a plan of reorganization is proposed that “violates the Bankruptcy Code.”

    The action on the part of the shareholders, who poured some $750 million in Series B funding into the company just months before it sank into bankruptcy, creates another faction of claimants.

    In a move that will further divide the Celsius case, the motion also requests that the court caps claims at the U.S. dollar value as of the date of the bankruptcy petition date. Effectively, this means that if cryptocurrency prices increase over the course of the proceedings, the upside goes to the equity holders and not the customers. If crypto goes down, however, customers take a hit.

    “This is a total bombshell likely to alienate the entire creditor body and constituencies,” Thomas Braziel, founder of bankruptcy investment specialist 507 Capital, said in an interview. “It is potentially leading to World War III in the Celsius case.”


    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Ian Allison

    Ian Allison is an award-winning senior reporter at CoinDesk. He holds ETH.

    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.