- A U.S. bankruptcy court barred former Celsius CEO Alex Mashinsky and related entities from making any claims to the estate, allowing creditor repayments to proceed without his interference.
- This follows his December 2024 guilty plea to fraud charges related to manipulating Celsius’s token and misleading investors.
- Celsius, once a major crypto lender managing billions in assets, froze withdrawals in June 2022 and filed for bankruptcy in July 2022 after being unable to meet user demands during a crypto market crash.
United States Bankruptcy Court for the Southern District of New York ruled that former Celsius CEO Alex Mashinsky and related entities have forfeited all claims to the estate.
In a significant development in the Celsius bankruptcy proceedings, the court ruled that funds can be distributed to creditors without interference from the former executive.
This decision follows Celsius filing for Chapter 11 bankruptcy in July 2022 after halting withdrawals due to a crypto market downturn.
Celsius was once a prominent cryptocurrency lender managing over $25 billion in assets.
The company faced allegations of misleading investors about its financial health and misusing customer funds.
In December 2024, Alex Mashinsky pleaded guilty to securities and commodities fraud charges. He also admitted to manipulating the platform’s token, CEL.
What happened to Celsius?
Launched in 2017, Celsius Network was a cryptocurrency platform based in Hoboken, New Jersey.
On the platform, users could deposit crypto, borrow money against crypto as collateral, trade and hold their proprietary CEL token, which offered higher yields.
At its peak in May 2022, Celsius managed $12 billion in assets, lent $8 billion to clients, and had 1.7 million users. It promised “bank-like” services but operated without the regulations of traditional banks.
On June 12, 2022, Celsius froze all withdrawals, swaps, and transfers, blaming “extreme market conditions.”
When the crypto market crashed in 2022, Celsius couldn’t meet the demands of users trying to pull out their funds.
The CEL token crashed 33% to $0.21.
On July 13, 2022, Celsius filed for Chapter 11 bankruptcy in New York, revealing a $1.2 billion deficit. It owed $4.7 billion to users, including $4.2 billion to 600,000 Earn account holders.
As part of the bankruptcy proceedings, Celsius made significant strides in repaying its creditors. By August 2024, the company had distributed approximately $2.53 billion to over 251,000 creditors, representing about 84% of the $3 billion owed.
However, many creditors are yet to claim their funds, with approximately 121,000 individuals not taking action, often due to the small amounts owed.
The bankruptcy plan, approved in November 2023, also included the creation of a new company, referred to as “NewCo,” which will focus on mining and staking operations.
Ongoing Struggle for Celsius
Despite these efforts, the legal battles continue.
Mashinsky faces a civil lawsuit from the New York Attorney General, alleging securities fraud under the state’s Martin Act. The lawsuit seeks monetary damages and a ban preventing Mashinsky from leading a company or working in the securities industry in New York.
The court’s recent decision to bar Mashinsky from claiming bankruptcy funds marks a significant moment in the ongoing efforts to resolve the Celsius bankruptcy and provide restitution to affected creditors.