Celsius pushes back deadline for claims amid mounting lawyer fees

Crypto lending involves the use of cryptocurrencies as collateral for loans. It is a relatively new and growing sector within the cryptocurrency market, and as such, it is important for lenders and borrowers to understand the risks and protections in place in the event of a bankruptcy. Creditor protection, in particular, is a critical aspect of any bankruptcy proceeding, as it ensures that the rights of creditors are upheld and that they are able to pursue payment for any outstanding debts. 

In this context, it is worth exploring the recent bankruptcy proceedings of Celsius Network, a prominent crypto lender, and the impact on its creditors.

1- Celsius Network Extends Deadline for Claims

Celsius Network, a crypto lender that filed for bankruptcy in July 2022, has recently announced plans to extend the deadline for users to submit claims in the bankruptcy proceedings. The current deadline, set for January 3, will be pushed back to early February, with the bankruptcy court set to hear the motion on January 10. The extension has caused some concern among Celsius creditors, who have already submitted over 17,200 claims as of December 29.

One of the main reasons for the extension is the high cost of the bankruptcy proceedings, with administrative expenses, including lawyer and adviser fees, totaling over $53 million as of December 2022. These fees have been criticized by some in the crypto community as eating into Celsius' estate and potentially reducing the amount of money available for creditor returns.

It is worth noting that, so far, only $44 million has been earmarked by Celsius for customer returns, representing a minority of the $4.72 billion in user deposits held by the company. This has led to frustration among some creditors, who have accused the lender of using delay tactics and wasting time and money.

It remains to be seen how the extension will impact the claims process and the overall outcome of the bankruptcy proceedings. It is important that any decisions made during the process are transparent and fair, and that creditor rights are adequately protected.

2- Understanding the Claims Process in Bankruptcy Proceedings

In bankruptcy proceedings, the claims process allows creditors to assert their rights to payment for any outstanding debts. Creditors are typically notified of the bankruptcy and given a deadline to file their claims. The claims may be related to unpaid invoices, loans, or other debts that the debtor (the company or individual filing for bankruptcy) owes to the creditor.

The claims process typically involves the submission of a proof of claim form, which provides information about the creditor's identity, the nature of the debt, and the amount owed. The creditor may also need to provide supporting documentation, such as invoices or contracts, to verify the claim.

Once the claims have been filed, the bankruptcy court will review them and determine their validity. If a claim is deemed valid, it will be included in the list of allowed claims and the creditor will be entitled to receive payment according to the terms of the bankruptcy plan. If a claim is disallowed, the creditor may have the opportunity to appeal the decision or negotiate a settlement with the debtor.

The claims process plays a crucial role in bankruptcy proceedings, as it helps to ensure that creditors are able to assert their rights to payment and that the debtor's assets are distributed fairly among the creditors. It is important for creditors to carefully review the bankruptcy notice and follow the proper procedures for filing their claims in order to protect their interests.

3- Celsius Creditors Express Concerns over Mounting Lawyer Fees and Their Impact on the Lender's Estate

There have been growing concerns among Celsius creditors about the high cost of the bankruptcy proceedings and the impact on the lender's estate. According to reports, the administrative expenses, including lawyer and adviser fees, have already exceeded $53 million. This has raised concerns that the fees are eating into Celsius' estate and potentially reducing the amount of money available for creditor returns.

Some creditors have expressed frustration with the mounting lawyer fees and have accused the lender of using delay tactics and wasting time and money. There have also been criticisms of the fee statements from some of the law firms representing Celsius, such as Kirkland & Ellis, which requested a fee of over $9 million for work done in September and October 2022.

It is important to note that the bankruptcy process can be complex and costly, and it is not uncommon for fees to accumulate as the proceedings progress. However, it is also important for the fees to be reasonable and justified, and for the creditor's interests to be adequately protected. It remains to be seen how the mounting lawyer fees and the extension of the deadline for claims will impact the overall outcome of the bankruptcy proceedings for Celsius creditors.

4- Comparing Customer Return Funds to Total User Deposits Held by the Company

According to reports, only $44 million has been earmarked by Celsius for customer returns in the bankruptcy proceedings, representing a minority of the $4.72 billion in user deposits held by the company. This has led to frustration among some creditors, who have accused the lender of using delay tactics and wasting time and money.

It is worth noting that the $44 million set aside for customer returns is intended for users who only ever held funds within the Custody Program, and does not include funds held in other programs or accounts. It is not clear how the remaining user deposits will be affected by the bankruptcy proceedings or whether they will be eligible for any returns.

The comparison of the amount set aside for customer returns versus the total amount of user deposits highlights the potential impact of the bankruptcy on creditors and the importance of protecting their interests. It is important for the distribution of assets and returns to be transparent and fair, and for creditors to be able to assert their rights to payment.

5- Analysis of the potential implications of the deadline extension for Celsius creditors and the broader crypto community.

The decision by Celsius Network to extend the deadline for claims in its bankruptcy proceedings has the potential to have significant implications for its creditors and the broader crypto community.

For Celsius creditors, the extension may prolong the claims process and delay the resolution of the bankruptcy proceedings. This could lead to uncertainty and potentially reduce the amount of money available for creditor returns, depending on how the fees and expenses associated with the proceedings evolve. It is important for creditors to carefully review the bankruptcy notice and follow the proper procedures for filing their claims in order to protect their interests.

For the broader crypto community, the extension and the high cost of the bankruptcy proceedings may raise concerns about the risks and protections in place for crypto lending. It may also lead to increased scrutiny of the practices and policies of crypto lenders and the potential impact on creditors in the event of a bankruptcy.

Overall, the extension of the deadline for claims and the mounting lawyer fees highlight the importance of transparency and fairness in bankruptcy proceedings, particularly in the emerging field of crypto lending. It is crucial for creditors to be able to assert their rights to payment and for the distribution of assets to be handled in a fair and equitable manner.

In conclusion, the extension of the deadline for claims in the bankruptcy proceedings of Celsius Network and the high cost of the proceedings highlight the importance of transparency and fairness in bankruptcy proceedings, particularly in the emerging field of crypto lending. It is crucial for creditors to be able to assert their rights to payment and for the distribution of assets to be handled in a fair and equitable manner. The outcome of the proceedings will have significant implications for Celsius creditors and the broader crypto community, and it is important for all parties to be aware of the risks and protections in place.