Celsius, the bankrupt cryptocurrency lending firm, is taking steps to allocate funds from the sale of its self-custody platform, GK8. In an effort to reduce administrative costs and avoid litigation, the debtors have reached an agreement with the Series B holders for the distribution of $25 million.
Settlement Agreement and Distribution of Funds
The Debtors, Creditors’ Committee, and initial consenting Series B preferred holders have successfully reached an agreement regarding the allocation of funds. According to the proposal, $24 million will be designated for legal expenses, providing reciprocal benefits to the initial consenting Series B holders. The remaining $1 million will be distributed among the holders, ensuring a fair division of the proceeds.
Moreover, the settlement agreement aims to avoid costly litigation and a protracted confirmation process, which would entail increased professional fees. Furthermore, the parties involved have expressed their mutual desire to reduce administrative costs and uncertainties.
By approving the settlement, the court would unlock substantial value for the creditors. Additionally, it will provide certainty for all parties involved.
Background: Celsius’ Acquisition of GK8 and Recent Developments
Celsius made headlines in late 2021 when it acquired GK8, an Israeli self-custody startup, for $115 million. However, following Celsius’ collapse in 2022, the troubled crypto lender was compelled to sell GK8 as part of its restructuring plan. In late 2022, Galaxy Digital, led by Mike Novogratz, emerged as the winning bidder for GK8. Galaxy Digital acquired GK8’s team of 40 experts, along with their office in Tel Aviv.
Importantly, in July 2023, GK8 hosted a meeting with financial executives at their New York offices. There, they highlighted their continued operations and growth in the industry.
Legal Challenges Faced by Celsius
Furthermore, Celsius currently faces a series of legal issues. On July 13, the United States Securities and Exchange Commission filed a lawsuit against the company. This also coincides with the arrest of the former CEO, Alex Mashinsky.
Additionally, the U.S. Federal Trade Commission issued a $4.7 billion fine against Celsius on the same day. Mashinsky who pleaded not guilty to charges of misleading customers and inflating the Celsius token, was released on bail of $40 million.
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