As Celsius Network LLC, et al., Case Number: 22-10964 (MG), proceeds in the Bankruptcy Court for the Southern District of New York (the “Court”), recent case updates relating to the approaching claims bar date:

As discussed in a previous Bitblog entry, the last date to file a proof of claim in the Celsius bankruptcy case is January 3, 2023, at 5:00 p.m. Eastern Time (the “Claim Deadline”). Any holder of a claim that fails to file a proof of claim[1] by the Claim Deadline cannot assert a claim against the Debtors at a later time and cannot vote on a plan of reorganization. Part of the purpose of the Claim Deadline is to give the Debtors a full picture of what their liabilities are so that they can fashion a plan of reorganization to repay and/or compensate their creditors, at least in part.

Since many of the claims in the Celsius case are filed on behalf of cryptocurrency account holders, there are a few particularities to the proof of claim process that are worth mentioning:

• If a creditor is in complete agreement with their claim amount as listed by the Debtors’ on the Debtors’ Schedules, they do not need to file a proof of claim. This means that these creditors will still have a valid claim against the Debtors in the amount listed in the Schedules pertaining to their claim, even if they do not file a proof of claim. In any event, it is still advisable to file a proof of claim regardless.

• One of the advantages of filing a proof of claim in this bankruptcy case is that it allows claim holders to preserve their rights to additional claims against the Debtors in addition to their cryptocurrency claim. An example of such a claim could be an allegation of fraud based on how the Debtors marketed the cryptocurrency lending products.  In this regard, when drafting a proof of claim it is recommended that the claimant be as specific as possible in identifying which statements by Celsius or its executives were fraudulent or misleading.

• Additionally, it is recommended that a creditor have its claim lodged against all of the debtor entities and not just against Celsius LLC in order to give the claim holder a claim against the assets of all the Debtor entities instead of just one.

• The proof of claim should also mention any airdropped tokens that a creditor believes that they are entitled to have received during the period that their crypto wallet was given to Celsius. 

• It is recommended that one retain counsel to assist with drafting the proof of claim and any addendum and supporting documentation, as well as filing the proof of claim.

• Claimants can attach an addendum to their proof of claim explaining the claim, preserving rights, and attaching any important documentation to the claim.

• The claims process will be handled and monitored by Stretto, the Debtors’ Claims and Noticing Agent. Proof of claim forms can be mailed to Stretto (and must be received by January 3, 2023, at 5:00 PM Eastern Time). Alternatively, the proof of claim can be filed electronically. For Celsius customers, the electronic filing process requires the use of your Celsius account email address and your customer claim number.

• Unfortunately, filing a proof of claim does not obligate the Debtors to pay your claim and does not initiate proceedings to demand payment. Instead, all claims will be considered together and worked out as part of a plan of reorganization during the bankruptcy proceedings.

• Customers with outstanding loans to Celsius in which the Debtors hold collateral should also file a proof of claim noting the existence of the collateral granted to Celsius and held by them.

• There is a developing market for Celsius claims under which a third party may buy a claimant’s claim(s). Currently, the market for these claims is priced at a very large discount to the face value of the claims. Third party claims buyers will almost certainly demand that a claim has a proof of claim filed before the Claim Deadline with an added reservation of rights  and may not simply rely on the Debtors having scheduled the claim (another reason why filing a claim with the court is advantageous to the claimant).

FOOTNOTES

[1] Some creditors are not required to file a proof of claim. To determine if this may apply to you, review the Order Setting Bar Dates for Submitting Proofs of Claim at Docket No. 1368 on the Court’s docket.