UPDATE AS OF 7/14/2022:
Celsius Network has now filed for bankruptcy. We are evaluating the filings, but the next step for anyone who had currency on the network will be filing what is called a proof of claim. The due date is generally 90 days after what is called a “341 meeting,” or a meeting of the creditors in the case with the bankruptcy trustee. It will be at least 3 months before the proof of claims are due, but it is also possible the court could change the date or alter the standard form, which would not be surprising given the various issues with people from numerous countries and with converting cryptocurrency to U.S. dollars.
The court docket for the Celsius Network bankruptcy is here:
We are also evaluating litigation options against other entities as to whom the bankruptcy’s stay does not apply. One thing revealed in the bankruptcy filings is that Celsius maintains multiple D&O insurance policies, or Director’s and Officers Insurance, which cover legal claims against their executives.
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Rumors are spreading that Celsius Network may be filing for bankruptcy after the company halted withdrawals of all cryptocurrency on the exchange. News articles have suggested, for example, that Celsius Network has hired restructuring experts to plan for a bankruptcy, or that Goldman Sachs and others are actively raising funds hoping to buy up the available assets at a firesale price.
If your crypto is stuck on the Celsius Network exchange, you’re probably wondering what this means for you and what your options are. Celsius Network LLC is a New Jersey corporation, and its headquarters are there, so it’s highly likely that any bankruptcy would be filed in the state.
First, in the bankruptcy itself, you will likely want to file a proof of claim, which is something that lets the bankruptcy trustee know you are owed money. A bankruptcy trustee is a person appointed to try to recover assets for the creditors. It’s unclear what percentage will be recoverable in bankruptcy, but because of how long a bankruptcy will take to conclude, this is almost certainly something you want to pursue—for example, if Celsius’s assets include cryptocurrencies and the price recovers before the end of a bankruptcy, the payout could be much higher than expected.
Second, you should consider whether you want to file an arbitration or lawsuit against Celsius Network or others who are potentially liable. Our law firm is available to represent people making legal claims against Celsius Network. We generally stage any payments from you so that you can pay as the case proceeds. Economically, it probably makes sense to sue if you have more than $100,000 at stake, but that’s ultimately a personal decision. You can read more about this at our law firm’s page on how to file an arbitration against Celsius Network.
One thing you should know is that if a bankruptcy is filed, any pending lawsuits or arbitrations against Celsius Network will be automatically stayed (i.e., paused). It’s possible to lift that stay and go ahead, but that’s up to the bankruptcy court.
Another option our firm is actively pursuing is litigation against other people responsible for the unlawful refusal to allow withdrawals. Lawsuits against third parties are not automatically stayed if the corporation (Celsius Network LLC) files for bankruptcy, but the bankruptcy court will be able to decide whether they get stayed or not. If they are stayed, there is still the option to go forward in bankruptcy in something called an “adversary proceeding,” or to wait and go forward once the bankruptcy is over. One benefit to this is that there may be insurance policies or insurance companies who would be obligated to pay for these kinds of claims, as well as the assets of those responsible parties, which means there may be a pot of money that only the people who actually sue will be able to access.
Our firm is actively representing people trying to recover their cryptocurrency from Celsius Network. We may be able to help if you have money locked up there.
If you’d like to hire us to arbitrate against Celsius Network, or any other cryptocurrency exchange, call us at 657-845-3100 or e-mail us at contact@kneuppercovey.com.