Celsius Creditors Gain $2.5 Billion as Mashinsky Waives Asset Claims

Former Celsius CEO Alex Mashinsky has formally agreed not to pursue any share of the assets being distributed through the company’s ongoing bankruptcy process. A motion filed by the United States Bankruptcy Court for the Southern District of New York revealed that Celsius debtors and Mashinsky have reached a legal agreement to prevent any payouts to the former executive and his related parties.

The filing allows Celsius to distribute funds that were previously locked due to outstanding claims by Mashinsky and the three entities. The court retained jurisdiction to oversee any disputes related to the agreement but made clear it will not interfere with Mashinsky’s ongoing criminal case. The court stated, “The Court shall have exclusive jurisdiction to resolve any and all disputes related to this Stipulation and Order,” underscoring that the criminal proceedings remain separate and unaffected by this bankruptcy arrangement.

The agreement follows Mashinsky’s sentencing in May, where he received 12 years in prison after being found guilty of fraud connected to the collapse of Celsius Network. His legal team had appealed for leniency by highlighting his past military service and his December guilty plea. Despite these efforts, the court handed down a significant sentence, though it stopped short of the 20 years requested by the U.S. Department of Justice. Mashinsky’s lawyers argued that such a sentence would amount to a “death-in-prison” outcome given his age.

Mashinsky’s downfall has been a focal point in the broader scrutiny of failed crypto lenders, many of which collapsed during the 2022 market downturn. While Mashinsky is barred from recovery, creditors have begun seeing some relief. Since the start of 2024, creditors have claimed more than $1 billion in assets. In August 2024, the Celsius disbursed over $2.5 billion to more than 251,000 creditors. However, around 121,000 potential claimants opted not to stake their claims—largely because the amounts were below $1,000, with many losing under $100. In a follow-up announcement from November, Celsius confirmed a $127 million payout from its “Litigation Recovery Account,” aimed at retail users and Earn program participants.

Celsius initially filed for Chapter 11 bankruptcy protection in July 2022, and two key settlements reached in 2023 have since helped the company advance toward completing its restructuring. The bankruptcy process has been a complex and lengthy one, involving numerous legal battles and negotiations. The agreement between Mashinsky and Celsius debtors is a significant step forward in the process, allowing the company to move closer to resolving its financial issues and distributing assets to creditors.

The broader implications of Mashinsky’s sentencing and the ongoing bankruptcy process are significant for the crypto industry. The collapse of Celsius Network and the subsequent legal actions against Mashinsky have highlighted the risks and challenges associated with crypto lending and the need for greater regulation and oversight in the industry. The outcome of the bankruptcy process and the distribution of assets to creditors will be closely watched by industry participants and regulators alike, as it could set a precedent for future cases involving failed crypto lenders.