Celsius Creditors Gain $127 Million From Litigation Recovery Account

Former Celsius CEO Alex Mashinsky has agreed not to claim any assets from the Celsius bankruptcy proceedings. This agreement, filed on Monday, was reached between Celsius debtors and Mashinsky, along with AM Ventures Holdings Inc., Koala1 LLC, and Koala3 LLC. The stipulation explicitly prohibits the distribution of any proceeds from Celsius’ bankruptcy to these parties. This decision allows Celsius debtors to distribute funds that were previously tied up due to claims made by Mashinsky and the related entities.

The United States Bankruptcy Court for the Southern District of New York retained jurisdiction over all matters related to this case, ensuring that any disputes arising from this agreement will be resolved within the court's purview. However, the court will not interfere with the ongoing criminal case against Mashinsky. The court's motion emphasized its exclusive jurisdiction to handle any disputes related to this stipulation and order.

Mashinsky's legal troubles began in earnest in May when he was sentenced to 12 years in prison. A US judge found him guilty of committing fraud, a verdict that has had significant implications for his involvement in the Celsius bankruptcy proceedings. Mashinsky's legal team had argued for a more lenient sentence, citing his military service and his guilty plea in December. However, the US Department of Justice had initially sought a 20-year prison sentence, which Mashinsky's lawyers contended would be equivalent to a "death-in-prison sentence."

Despite Mashinsky's legal issues, Celsius creditors have made substantial progress in recovering their assets. Collectively, creditors have claimed more than $1 billion in assets this year. In August 2024, Celsius paid out over $2.5 billion to more than 251,000 creditors. However, approximately 121,000 creditors did not stake their claims due to the amounts being less than $1,000, with the vast majority losing less than $100. In November 2024, Celsius announced that it would pay out $127 million from its “Litigation Recovery Account” to creditors, including retail borrowers, retail depositors, and users of its Earn program.

Celsius reached two settlements in July 2023 to exit Chapter 11 bankruptcy proceedings, which were initiated in July 2022. Chapter 11 bankruptcy is a legal process in the US that allows businesses to restructure without facing immediate repercussions from creditors. This process has enabled Celsius to navigate its financial difficulties and work towards compensating its creditors.