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Celsius Plans to Merge U.K., U.S. Entities Amid Allegations Distinction Was a ‘Sham’

Celsius to merge UK, US entities
Celsius to merge UK, US entities

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Celsius, the renowned cryptocurrency lender, plans to join its United Kingdom (U.K.) and United States (U.S.) entities. This comes amid allegations featured in court filings indicating that distinguishing the two is a “sham”- counterfeit.

With the new class action lawsuit, Celsius becomes the latest addition to the list of crypto firms facing allegations of less-than-standard record keeping in their corporate structure. The court fight has pitted Celsius customers against its Series B investors.

Celsius Case Background

The case traces back to 2021 when the Financial Conduct Authority in the United Kingdom warned the firm’s subsidiary, Celsius Network Limited, to shut down its operations in the U.K. Notably, the directive came from. In response, Celsius established a Limited Liability Company intending to move assets through several financial transactions in Delaware.

Citing a filing on May 1 by Celsius:

The migration resulted in intercompany chaos.

Further, the filing added that internal records were “solely lacking.” According to Celsius, this makes it hard, if not impossible, to separate the affairs of individual entities.

Regular customers failed to understand the implications of the transfer, saying that the management misled them. However, the filing notes that the more nuanced and sophisticated Series B investors were fully aware of and understood the deficiencies in record keeping.

According to the filing, the two entities should be treated as a single organization for bankruptcy purposes.

Reorganization Was A Sham

Based on parallel filing by a committee of Celsius’ creditors, the reorganization was a “sham” and “façade.” In this respect, the committee has deemed the billions of dollars transferred between Celsius and Celsius Network Limited were fraudulent. With this, they call for the New York court attempting to restore funds to creditors to disregard the funds.

It is worth mentioning that these assertions reiterate the claims made about cryptocurrency exchange FTX, whose legal representatives described the bankrupt crypto firm as a “digital Potemkin village, whose slick front-end disguised a messy and ill-governed reality.”

Tracing back to March 9 during an opinion poll, Judge Martin Glen determined that customers could only lay claim against Delaware LLC entity. This finding increased the chances that Series B preferred equity holders could recover some of their investments. Normally this would be minimized under bankruptcy law.

In the week of July 24, 2023, Judge Glenn will again determine Celsius’ argument about the two entities being “substantively consolidated,” bringing together the customers’ assets and claims.

Celsius filed for Chapter 11 bankruptcy protection in July 2022, but the company’s assets will be auctioned on Wednesday, May 3. It is imperative to note that favored bidder NovaWulf now faces significant competition from the likes of Fahrenheit LLC and the Blockchain Recovery Investment Committee.

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