BnkToTheFuture

Celsius wants to extend the deadline for claims as lawyer fees mount

Administrative expenses from the bankruptcy proceedings have already topped $53 million, and continued delays are chipping away at Celsius’ estate.

Bankrupt crypto lender Celsius Network is planning to file a motion that would extend the deadline for users to submit their claims by another month.

The crypto community has started to grow impatient, noting that Celsius’ lawyer fees have continued to stack up and are eating away at the lender’s estate.

In a Dec. 29 tweet, Celsius announced that it would seek to extend the current deadline for claims from Jan. 3 to early February. 

The bankruptcy court is set to hear the motion on Jan. 10, and according to Celsius, the Jan. 3 deadline will be extended until at least then.

The claims process allows creditors who believe they have a right to payment to file claims during bankruptcy proceedings. Celsius’ creditors had made over 17,200 claims as of Dec. 29.

However, Celsius’ creditors appear antsy as Celsius’ administrative fees have continued to rack up since it first filed for bankruptcy in July. A Dec. 27 Financial Times report noted that the fees charged by bankers, lawyers and other advisers in the bankruptcy case had already reached $53 million.

As an example, a Dec. 15 fee statement from one of the law firms representing Celsius, Kirkland & Ellis, requested a fee of over $9 million for work done during the months of September and October.

In comparison, only $44 million has so far been earmarked by Celsius to be returned to customers. This money belongs to users who only ever held funds within the Custody Program, and represents a minority of the $4.72 billion of user deposits held by Celsius.

Some in the crypto community have been unimpressed with the latest postponement in the proceedings, alleging that it’s yet another “delay tactic.” For example, one user noted “Stop wasting time stop extending, just go on with proceedings and give me my money back!!!!” while another simply said: “Stop wasting time and my money.”

Related: 7 biggest crypto collapses of 2022 the industry would like to forget

Global investment platform BnkToTheFuture founder Simon Dixon, who has been an active voice in the Celsius bankruptcy proceedings, noted in a Dec. 23 tweet that by the time users are able to get their funds back from Celsius, they should only expect around to receive around hal what they put in.

At the behest of Celsius, the U.S. trustee, and the unsecured creditors’ committee, judge Martin Glenn appointed fellow judge Christopher Sontchi to be a “fee examiner” on Oct. 20. His job is to negotiate and approve the fees set by lawyers and other professionals in the case.

The fee examiner is also being paid out of Celsius’ estate, with the latest fee statement submitted on Dec. 21 requesting just under $20,000 for work done during November.

Celsius bankruptcy judge gives the nod for independent examiner probe

Following a motion in August, U.S. Bankruptcy Judge Martin Glenn has signed off on a request to appoint an examiner in the Celsius case.

A federal judge overseeing crypto lender Celsius’ bankruptcy case has given the green light for the motion to appoint an independent examiner to investigate aspects of Celsius’ business.

In an order dated Wednesday from the United States Bankruptcy Court of the Southern District of New York, the order notes that the examiner’s investigation will look into Celsius’ digital assets, tax payment procedures and the current status of its mining business following calls for greater transparency. 

The examiner will also look into why there was a change in account offerings in April, resulting in some customers being moved from the Earn Program to Custody Services while others were moved to a “Withhold Account.”

The U.S. Trustee had previously referred to a lack of transparency around these accounts, with customers unaware of who holds what account and why. This may be important given Celsius had asked the court to return assets to “custody clients,” but not its “earn-and-borrow” clients.

A motion to appoint an examiner originally came from an Aug. 18 filing from the United States Trustee handling Celsius’ bankruptcy proceedings, citing “significant transparency issues” surrounding Celsius’ business operations.

However, BnkToTheFuture CEO Simon Dixon said the scope of the examiner’s investigation was pared down since the motion was initially filed so that Celsius doesn’t run out of money.

He also noted that Celsius Network CEO Alex Mashinsky would need to provide information on his withdrawals from the platform before the freeze.

The latest order also outlined that the scope of the investigation could be expanded if deemed necessary, but would require consultation with Celsius and the official committee of unsecured creditors.

Celsius will be required to produce all documents the examiner “reasonably deems relevant to perform the Investigation, though Celsius will have grounds to reject a request, which would then be decided by the courts. 

Related: Celsius CEO plans to restructure firm to focus on crypto custody: Report

Once the identity of the examiner has been approved, they will have seven business days to produce a work plan and budget.

The court will then have seven days to approve these, after which the examiner will have 60 days to complete their investigation.

Celsius filed for Chapter 11 bankruptcy and froze withdrawals in July. Since then, some depositors have been told their funds will be released, but most are still unable to access their assets with no guarantee they will ever receive them.

It seems as though the Examiner will be very busy once they are appointed, with Dixon also tweeting that the U.S. Trustee already has forty parties ready to be interviewed.


Keys lost in the Vauld: Singapore crypto exchange freezes withdrawals

Not your keys, not your coins. Crypto CeFi lender Vauld has suspended “all withdrawals, trading and deposits.”

Crypto contagion claims another casualty. In a statement, Singapore-based crypto exchange Vauld has made the “difficult decision to suspend all withdrawals, trading and deposits on the Vauld platform with immediate effect.”

In what appears to be a run on the crypto bank, the group intends to “apply to the Singapore courts for a moratorium,” as Vauld customers have tried to withdraw an “excess of a $197.7 million since 12 June 2022.”

The decision to suspend withdrawals is a screeching U-turn. Reportedly, Vauld boasted $1 billion assets under management in May this year, while on June 16, a company email stated that business would “continue to operate as usual.” Just 18 days later, the company is exploring “potential restructuring options.”

On June 21, CEO Darshan Bathija tweeted that Vauld had cut its team by 30% — the first sign that the company was under duress. Separately, Bathija also stressed that Three Arrows Capital (3AC) was an early investor in the company, but had exited in late 2021.

The statement from Vauld suggests that “volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate” were reasons behind their decision to freeze customers’ money.

Nonetheless, 3AC’s demise is cited and considered a significant contributor to capitulation among centralized finance (CeFi) companies. 3AC had substantial exposure to Luna Classic (LUNC), which blew up in spectacular fashion, reducing 3AC’s holdings from $560 million to $670. 

Indeed, Vauld follows in the footsteps of large CeFi platforms such as Celsius, Voyager and BlockFi. Voyager explicitly blamed 3AC for their recent decision to freeze customers’ funds and BlockFi is close to a $240 million deal with FTX following financial difficulties, while plans to salvage Celsius from bankruptcy were recently shared by lead investor BnkToTheFuture.

For crypto investigative journalist Otterooo, Vauld’s strife is more motivation for investors to hold their own keys. Holding onto one’s private keys is a guiding principle of crypto investing: If you do not hold your own keys, you do not own your coins.

As Cointelegraph reported in a March 2021 press release, Vauld boasted double-digit interest rates on popular stablecoins such as Tether (USDT) and Dai (DAI), while Bitcoin (BTC) interest could reach 7.23%. In effect, in “lending” your cryptocurrency tokens to Vauld, you would generate a yield. However, the company effectively owns your assets.

Vauld’s interest rates from March 2021. Source: Vauld

The rates were competitive with lenders and interest bearers such as Celsius, BlockFi and Nexo — one of which continues to function. Nexo tweeted that there may be delays to customer transactions due to Independence Day in the United States. 

BnkToTheFuture unveils 3 proposals to rescue Celsius from oblivion

BnkToTheFuture’s three proposals include two different ways to restructure and relaunch the firm or an option to co-invest in the firm with a bunch of Bitcoin whales.

Celsius’ lead investor BnkToTheFuture has outlined three proposals to save Celsius from bankruptcy while finding a good outcome for shareholders and depositors with funds stuck on the platform.

Shared on Twitter by BnkToTheFuture CEO Simon Dixon on Thursday, the three distinct proposals include either two options of restructuring and relaunching Celsius or potentially co-investing in the platform alongside wealthy Bitcoin (BTC) whales.

“Proposal #1: A restructuring to relaunch Celsius and allow depositors to benefit from any recovery through financial engineering.”

“Proposal #2: A pool of the most influential whales in Bitcoin to co-invest with the community.”

“Proposal #3: An operational plan that allows a new entity and team to rebuild and make depositors whole.” 

Dixon previously referred to “financial innovation” being needed to be applied to Celsius, similar to the issuance of equity debt tokens like in the case of Bitfinex in 2016, which were designed to represent $1.00 of debt per token.

“We believe all attempts should be made to make depositors whole in order to maintain shareholder value,” the team wrote, adding it will be calling for a shareholder meeting that “legally cannot be ignored by the Celsius board:”

“Bnk To The Future Capital SPC holds over 5% of Celsius shares and therefore we believe that this allows us to call a shareholder meeting as part of our statutory shareholder rights that legally cannot be ignored by the Celsius board.”

BnkToTheFuture also suggested that after first submitting these proposals to Celsius and its advisers, it is now looking to “apply pressure” on the firm after getting “worried that time was running out” with its lack of a distinct plan of action. These sentiments were also echoed by Dixon in a Digital Assets News Interview on the same day:

“You have to move really fast, because the longer you go on, the more FUD comes out, bad PR comes out, more predatory offers come out, the more the community stops believing in what they originally believed in.”

Celsius’ users have been unable to withdraw assets from the platform since June 13 amid the firm’s ongoing liquidity issues. Meanwhile, there are fears that users may never get their funds back if the company were to go bankrupt.

Celsius may have its own solution

In a blog post on Friday, Celsius stated that it is working as fast as it can to stabilize its liquidity problems so that it can be “positioned to share more information with the community.”

While the firm did not reveal much about what this entails, Celsius stated that it is exploring options to protect its assets such as pursuing strategic transactions as well as a restructuring of our liabilities, among other avenues.

“These exhaustive explorations are complex and take time, but we want the community to know that our teams are working with experts from many different disciplines,” the blog post read.

FTX walked away from Celsius deal over bad financials

Related: Contagion: Genesis faces huge losses, BlockFi’s $1B loan, Celsius’s risky model

Reports surfaced on Thursday that Sam Bankman-Fried’s crypto exchange FTX recently walked away from a deal to purchase Celsius after finding a $2 billion hole in the company’s finances.

According to two unnamed sources close to the matter, FTX had entered talks with Celsius to either provide financial support or acquire the firm outright. However, apart from having $2 billion, an account for Celsius was said to be difficult to deal with.