Crypto lender Celsius Network appears to be emerging from its defensive squat amid bankruptcy proceedings that began last month, filing a pair of lawsuits in an attempt to recover funds.
why is it important: Even an allocation of tens of millions of dollars worth of coins following favorable decisions would have little bearing on Celsius’ liabilities, currently measured in the billions. But the details introduced in the costumes will probably return.
Driving the news: The company filed two lawsuits on Tuesday. One of them hit back at his former chief investment officer, Jason Stone, the counter-suiter, as well as his company KeyFi, for “millions” in stolen coins.
- The other lawsuit, against Prime Trust, accuses the custodian of being in possession of $17 million in coins rightfully owned by Celsius dating back to their business relationship, which ended abruptly in June 2021.
Catch up fast: Since Celsius began bankruptcy proceedings in July, customers have written more than 250 letters to the judge explaining their fate for having their savings locked up on the lender’s platform, offering solutions and accusing Celsius of fraud.
- Celsius chief financial officer Chris Ferraro in a hearing last week said the lender likely had sufficient funds for operations through the end of the year and expected the company is cash flow positive at the start of 2023.
The plot: A US Department of Justice official last week asked the judge handling Celsius’s bankruptcy proceedings to appoint an independent reviewer, like those named in complicated and high-profile cases. (Think: Enron or Lehman Brothers).
- The job of an examiner is to determine How? ‘Or’ What things fell apart. (The Lehman Examiner’s 2,200-page report details the investment manager’s outcome).
- Celsius via one of its social media accounts opposes this, citing the cost of the exam.
Details: Celsius’ countersuit to Stone’s allegations of “incompetence, deception and conversion” as well as “stolen millions” from a number of crypto lender wallets which were then used to purchase hundreds of NFTs and/or also , obfuscated via the now-sanctioned Tornado In Cash.
The other side: Recall Stone’s lawsuit alleged Celsius owed it and KeyFi “millions” via a profit-sharing deal and accused the crypto lender of running its business like a Ponzi scheme.
What they claim: “Stone knew he wasn’t allowed to convert Celsius coins to NFT. Granted, Stone knew he wasn’t allowed to steal Celsius, but that’s exactly what he did,” alleges the Celsius countersuit.
- Bullrun Babes, Cryptopunks and other unnamed NFTs belong to Celsius and any funds Stone invests in platforms or businesses using Celsius funds also rightfully belong to Celsius, according to the suit.
The lawsuit against Prime Trust alleges that the custodian held coins worth $17 million. Assets that weigh in the balance: 398 bitcoins, 196,268 Celsius (CEL) tokens, 3,740 ethers and 2,261,448 USDC stablecoins, according to Celsius’ suit.
- Prime Trust and Celsius partnered in March 2020 and the funds Celsius alleges Prime owes are linked to accounts held by clients in New York and Washington, the custody services.
Peter Jason did not respond to questions sent via social media; neither Prime Trust nor Celsius responded to email inquiries.
And after: The next Celsius hearing will be September 1 at 10 a.m. ET.
