In July 2022, cryptocurrency lender Celsius Network sent shockwaves through the industry by filing for bankruptcy; while it may not have shocked my seasoned Bitcoiners who preach self-custody, each cycle brings with it a cohort of new Bitcoin holders who have to learn that lesson the hard way.
Many users found their funds frozen, raising questions about their future and the stability of the wider crypto market. Celsius, along with several other crypto platforms (BlockFi and Voyager to name a few), had leveraged customer funds to try and earn the returns required to pay the insanely unstainable advertised yields that helped them attract Billions in customer deposits.
Fortunately, after 18 months of legal proceedings, Celsius has finally emerged from Chapter 11, offering a glimmer of hope for affected customers. This might feel like a lifetime for those who had their funds stuck with the defunct lender, but when you consider that Mt Gox creditors have been waiting a decade for payouts, the Celsius payout plan is a considerable speed run of the process.
The Repayment Plan
If you are a Celsius Network creditor, there is light at the end of the tunnel, and the new company that emerged from bankruptcy is ready to start distributing some of the recovered funds. Still, there are some conditions you need to be aware of before you start to plan the spending of your windfall.
Firstly, you should have received communication from either Celsius or the firm Stretto, which handles the bankruptcy proceedings.
They would have instructed you to confirm your balances and sign some documentation. If you’ve already gone through the initial claims process, you would have received several emails detailing claiming your funds.
US customers
US customers need to have an account with PayPal or Venmo using the same email address and KYC information that matches your Celsius account. If your email address does not match, you must change it in the Celsius app before the end of February or contact your provider to link the account.
International customers
As for international customers, you need to have an account with Coinbase using the same email address and KYC information that matches your Celsius account. If your email address does not match, you must change it in the Celsius app before the end of February or contact your provider to link the account.
The claim code
Once you’re set-up, you’re back to waiting for the claim codes to be distributed; once Celsius Network provides you with your code, you can submit the claim in your preferred platform, and the funds will be credited to your account.
Partial Repayment is on the cards
Considering the fact that the firm has not been able to recover a lot of the funds that Celisuis misappropriated, every depositor will need to take a haircut on their original deposit value to ensure the widest distribution of funds.
Reports vary, but according to Forbes, Celsius is in the hole to the tune of $4.7 billion. That’s how much Celsius owes to more than 100,000 creditors, according to its initial bankruptcy filing.
While not everyone will receive their full investment back, Celsius distributes $3 billion worth of cryptocurrency and fiat to creditors, including account holders held by the average retail investor from any country.
Crypto and fiat mix
Celsius accepted collateral in a host of illiquid altcoins, especially their own native token (CEL token), which is effectively worth zero, as it was solely backed by trading customer deposits, but even holders are in luck, as according to the payout plan, each token holder will receive approximately 57.9% crypto recovery is based on your dollarized claim from July 13, 2022, but paid back in the form of crypto priced on January 16, 2024.
The distributed funds will include a mix of Bitcoin, Ethereum and fiat currency, depending on the specific holdings of each user.
To give you an idea of how the payout would play out, consider the following:
The simplest would be stablecoins since the claims are priced in USD. If you had 1000 USDT, you would qualify to receive 579 USDT, which is not too bad, but you would need to eat the 42% loss.
Where it gets complicated is when we start to break down the claims for Bitcoin and the other tokens.
If you have 1 BTC in Celsius, it was worth $19,881 on July 13, 2022. You will then get 57.9% of this amount in Bitcoin distribution, or $11,511. Using the price of BTC on January 16, 2024 ($42,973), you might ultimately get back 0.26 BTC.
This translates to 26% in-kind liquid crypto distribution and a loss of 74% liquid Bitcoin. Yes, you got absolutely wrecked using Celsius; the risk of getting a 5-8% return on your Bitcoin resulted in a 74% loss.
How’s that for risk management?
If you didn’t hold Bitcoin or stablecoins, the calculations for your claim amount get a lot more complicated, but you can apply the same formula using the table below with the snapshot pricing.
| Coin | USD Price |
|---|---|
| (Bitcoin, stablecoins & altcoins) | At the time of snapshot |
| INCH | 0.581744108 |
| AAVE | 78.24291593 |
| ADA | 0.427003308 |
| AVA | 18.49035408 |
| BADGER | 3.285369715 |
| BAT | 0.37621662 |
| BCH | 100.546894 |
| BNB | 226.92614 |
| BNT | 0.450047559 |
| BSV | 50.99015321 |
| BTC | 19881.00134 |
| BTG | 15.14018234 |
| BUSD | 1 |
| CEL | 0.81565 |
| COMP | 47.33041601 |
| CW | 1.032841943 |
| cvx | 6.08763006 |
| DAI | 1 |
| DASH | 41.79955662 |
| DOGE | 0.061140905 |
| DOT | 6.360775884 |
| EOS | 0.929357695 |
| ETC | 14.12753443 |
| ETH | 1088.170943 |
| GUSD | 1 |
| KNC | 1.263392739 |
| LINK | 6.077201511 |
| LPT | 8.033566927 |
| ITC | 48.75597218 |
| LUNC | 0.00009241 |
| MANA | 0.80042259 |
| MATIC | 0.609434275 |
| MCDAI | 1 |
| MKR | 839.8922442 |
| OMG | 1.71960007 |
| ORBS | 0.040053336 |
| pAX | 1 |
| PAXG | 1738.836303 |
| SGA | 1.214643649 |
| SGB | 0.026003699 |
| SGR | 1.214643649 |
| SNX | 2.465894386 |
| SOL | 34.24173443 |
| SPARK | 0 |
| SUSHI | 1.214062046 |
| TAUD | 0.6748 |
| TCAD | 0.7701 |
| TGBP | 1.1881 |
| TH KD | 0.1274 |
| TUSD | 1 |
| UMA | 2.487366187 |
| UNI | 6.014518833 |
| USDC | 1 |
| USDT ERC20 | 1 |
| UST | 0.039474965 |
| WBTC | 19852.24182 |
| WDGLD | 168 |
| XAUT | 1741.393614 |
| XLM | 0.104188979 |
| XRP | 0.321111953 |
| XTZ | 1.483213139 |
| YFI | 5742.188874 |
| ZEC | 53.54163596 |
| ZRX | 0.277486691 |
| ZUSD | 1 |
New Company, New Shares
Getting something back might be better than nothing, but it’s still a bitter pill to swallow for creditors, so Celsiuis plans to sweeten the deal by offering common stock in a new company that will emerge from the ashes.
A portion of the repayment will involve shares in Ionic Digital, a new Bitcoin mining company owned by creditors who did not have stablecoins. 14.9% of the 37,000,000 Shares will be issued with the price set at $20.
These shares are expected to be publicly traded, offering potential future value. While a nice gesture of goodwill, we have yet to find out what the claims process for the shares will be or the liquidation period for the shares, nor how the price will hold up once released to the public.
Distributions Started
As of February 1, 2024, Celsius has begun distributing funds to creditors. However, individual timelines may vary as there
No Mobile App Access
The Celsius mobile and web applications will be shut down on February 28, 2024, so ensure that any data you would like to withdraw from the app is done before then, such as balances or transaction history, as it might help with any claim issues you might run into once the payouts roll out.
Distributions will not be processed through this platform, and once the app is removed from the app store, you won’t be able to access the account details.
Stay Informed
For the latest updates and specific questions regarding your claim, visit the Celsius bankruptcy website: [https://cases.stretto.com/celsius/]
The story doesn’t end here.
After this painful experience and the sole sucking admin of finally getting some of your funds back, you might want to wash your hands off the situation and move on. However, it might not be so simple; there are still many loose ends to tie up, and the result of those loose ends could have downstream effects for you as a creditor.
Ongoing Legal Disputes
Former CEO Alex Mashinsky faces fraud charges related to Celsius, and the legal outcome could impact the repayment process; as new evidence comes to light, there could be clawbacks or discovery of other assets that could be redistributed to creditors at a later stage.
Market Volatility
Cryptocurrency prices fluctuate significantly, so the value of your distributed assets could change. When events like mass payouts happen, they flood the market with a new set of sellers, so if you plan to liquidate your Bitcoin into fiat, consider the timing and size of your sales to get the best return.
Seek Professional Advice
Suppose you’ve never dealt with bankruptcy before, and you need help with how to deal with the claims process. In that case, your best bet is to consult a financial advisor familiar with crypto investments, which might be beneficial in navigating this complex situation.
This is especially true if you’re not interested in the digital assets you lay a claim to and want to get out of the market and back into fiat.
Giving Bitcoin another shot
If you still believe in Bitcoin and you’ve learned your lesson about counterparty risk, your next step is to set up a self-hosted wallet and pull the funds into that wallet, trusting no one with your money but yourself. While you will never be made whole in Bitcoin terms, you might still recover some relative purchasing power should Bitcoin continue to appreciate into the future.
