Celsius has reached settlements that will allow it to return user assets by the end of 2023, the Wall Street Journal reported. Celsius’ reorganization plan involves returning only part of the crypto users deposited on the platform.
Celsius will compensate users with shares in a new company to compensate for the remaining. Celsius will emerge as a new entity under the management of a cohort of investors led by Michael Arrington, co-founder of technology-focused news publication TechCrunch. The new firm will handle Celsius’ illiquid assets and its mining business.
One prong of Celsius’ settlements addresses customer allegations of fraud and misrepresentations by Celsius executives. Several Celsius users filed claims seeking damages for alleged misconduct by the lender’s former management, according to court documents filed on July 20.
The settlement terms have increased user recoveries by 5%, resolving 30,000 claims seeking compensation of $78 billion, court documents indicate.
The settlements also resolve the dispute between Celsius’ high-interest account depositors and fiat-currency loan borrowers. Those who borrowed fiat currency on the Celsius Network platform will get back the crypto they put up as collateral once they repay their loans, per the settlement terms.
Celsius users have been waiting for over a year
Celsius Network was one of the largest crypto lenders when it filed for bankruptcy on July 13 last year. At the time, Celsius owed its users $4.7 billion worth of crypto and had a $1.2 billion deficit on its balance sheet.
Last week, Celsius founder Alex Mashinsky was arrested for allegedly defrauding users. The U.S. Securities and Exchange Commission (SEC) levied fraud charges against Mashinsky and Celsius earlier this month.
In early July, the Commodity Futures Trading Commission (CFTC) found in an investigation that Celsius, under the leadership of Mashinsky, misled investors and violated U.S. regulations. The New York Attorney General also sued Mashinsky in January.
While the recent settlements bring hope to Celsius customers waiting for over a year, the settlements still require court approval. The lender will seek approval at an August 10 hearing, as per the WSJ report.
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