Celsius Network: A Chaotic Merge Between UK and US Entities Amid Bankruptcy Proceedings

Background: The Rise and Fall of Celsius Network

Celsius Network, once a shining star in the crypto lending world, has taken a nosedive that sounds like a script straight out of a drama series. With its roots firmly planted in the United States and the United Kingdom, it was cruising along until the Financial Conduct Authority (FCA) in the UK warned the firm to cease operations in June 2021. When the alarms started ringing, instead of pulling up stakes, Celsius decided to play a game of corporate hopscotch by establishing Celsius Network LLC in Delaware, effectively shuffling assets from one company to another. Not exactly a textbook response to regulatory scrutiny!

The Alleged ‘Sham’ Migration

Fast forward to recent court filings, and a tale of intercompany chaos emerges. According to the filings, the supposed separation between Celsius Network Limited (CNL) and Celsius Network LLC was nothing but smoke and mirrors. The chaos created by this migration is comparable to moving houses only to find out you packed the dog and the cat in the same box. The formal documentation regarding the relationships between these two entities was delayed and, when it finally arrived, it was as clear as mud.

Investors in the Crossfire

A notable aspect of the filings is the distinction—or lack thereof—between everyday investors and those labeled as “sophisticated” Series B investors. While the average Joe was left scratching their head over unclear documentation and asset movement, the seasoned investors were apparently in on the big secret. According to the Official Committee of Unsecured Creditors (UCC), the transfer was a facade meant to deceive. The filing calls for these entities to be treated as one to ensure smaller creditors don’t end up at the back of the recovery line.

Judge’s Take: Who’s Counting?

The situation took another twist when Chief U.S. Bankruptcy Judge Martin Glenn weighed in on March 9. It turns out, customers held claims only against the Delaware LLC, resulting in a favorable scenario for Series B investors. Who would have thought that navigating the murky waters of corporate structure could result in such uneven outcomes for creditors?

Upcoming Auction: Hope on the Horizon

Amidst the chaos, there is a light at the end of the tunnel. An auction for what remains of Celsius’s assets is lined up for May 3, with major players like Coinbase and Gemini in the wings. NovaWulf Digital Management, the so-called “stalking horse bidder,” is proposing a cash contribution that could help customers recover up to 70% of their funds. Fingers crossed that they don’t end up with a cardboard box of receipt papers as their final prize!