If you missed the May update I posted for Celsius Creditors, you can view it here. In this July update, I’ll cover three key topics:

• How to Claim Your Celsius Tax Write-off as a Non-US Creditor: Join our upcoming webinar.
• Updates from Ionic Digital & The Litigation Committee: Latest developments and what they mean for you.
• Summary of the July 2024 Court Hearing: Key takeaways and implications.

I’ll dive into each topic and provide a TL;DR on the next steps at the bottom of this page too. 

#1: Webinar: How Non-US Creditors Can Claim Their Celsius Tax Write-Off 

I will be hosting a webinar on Thursday, 18th July 2024 at 18:00 BST for all non-US Celsius Creditors. This session will cover how to write off Celsius claims and shares from a UK perspective, and how to use technology to simplify the process. You can register for the webinar here.

The webinar is open to all members with a FREE login to the Celsius Recovery Solution membership portal. Register for a login here if you don’t have a login already.

The webinar will be hosted by Recap (a privacy-centric tax software with a bespoke solution for Celsius Creditors), Andersen (a leading UK tax advisory firm that has dug deep into Celsius claims), and Bnk To The Future (an All-In-One Bitcoin Investment Platform for maximizing your recovery, staking ETH, and taking delivery of Ionic Digital shares for trading).

Featuring:

• Simon Dixon (Me), CEO, Bnk To The Future;
• Daniel Howitt, CEO, Recap;
• Ben Lee, Partner, Andersen;
• David Kahn, Head of Investment Banking, Bnk To The Future.

Key topics include:

• Understanding the UK tax consequences of the Celsius Chapter 11 bankruptcy;
• Insights into why calculating a tax loss is complex;
• The filing position adopted by Andersen LLP for its UK clients;
• How Recap can automate your crypto tax write-off calculations.

To attend, please register here.  Make sure you have a free login to my Celsius Recovery Solution here.

#2: Updates From Ionic Digital & The Litigation Committee

There have been no updates on the delivery date for Ionic Digital shares. 

You can find a brief update from Ionic Digital on X here.

“Machines out of boxes and onto racks at one of the buildings at Cedarvale.  Looking forward to energization”

And some photos from a site visit by board observer Joe Lehr here:

Bnk To The Future has secured all regulatory permissions, opened the necessary accounts, and developed our technology to receive shares for non-US creditors through my exclusive recovery club. If you would like us to take delivery of your shares for you to hold or sell once they are delivered, you can still join my exclusive recovery club here.

Additionally, the Litigation Oversight Committee has provided an update on the anticipated timing of a litigation related distribution:

“On July 1, 2024, the Litigation Administrator commenced filing complaints against Celsius account holders who have failed to settle their preference liability. 

The prior settlement program resulted in the recovery of nearly $100 million and the resolution of more than a half billion dollars of preference liabilities.

Non-settling Celsius account holders can expect vigorous pursuit for the recovery of the full value of cryptocurrency transferred during the preference period. 

Read more about this announcement here.”

#3: Summary of the July 2024 Court Hearing

Last week there was a post-emergence court hearing for the Celsius Chapter 11 bankruptcy. 

Here are the slides from the court hearing:

The agenda was published on Stretto here (Doc 4989). Here is a quick summary of what was included: 

• Fee Examiner's Report on Final Fee Applications by the Advisers to the Chap 11 process
• Voelker Appeal - motion to strike item in Jason Voelker's designation of items to be included in the Record of Appeal (doc 4926).

3 Items were adjourned to the next Court Hearing on 29 July 2024 at 2pm ET:

• RSM Final Fee Application (auditors)
• Motion by Debtors to compel discovery in relation to equitable treatment of corporate creditors (doc 4866)
• Motion for further distribution under the Plan for the Faller Creditors (Doc. 4911).  The Debtors have objected to this motion (Doc. 4974 and 4976).  40 parties have submitted joinders to the Faller Creditors' motion.

Before the July Court Hearing, the Faller Creditors' motion (doc. 4911) and the Debtors' objection to it (doc. 4974) were published on the docket. Here are the details on The Faller Creditors' Motion:

• The Faller Creditors' are a group of 4 corporate creditors who are aggrieved by the losses they have suffered due to (a) having unfairly (they claim) received distribution in US dollars rather than crypto while other larger corporate creditors received crypto and (b) such distribution was delayed for 82 days (an unreasonably long time, they claim) in a rising crypto market and causing the Faller Creditors to lose approx. $350,000.  They are seeking compensation for their losses.
• The Debtors' Objection: The Debtors assert that the Faller Creditors (a) being among the 100 top corporate creditors, were given the option to receive either crypto or cash and that the Fallers opted to receive cash, and (b) the Fallers received two-thirds of their cash within 3 weeks of emergence while the remaining third was delayed due to their having provided incorrect wire transfer information. Therefore, they argue, the Fallers' motion is inconsistent with the Plan.
• The Faller Creditors' motion has been joined by a further 40 corporate creditors and the number is growing.  The Debtors object to these joinders on the basis that (even though these joining creditors were not given the option to receive crypto) their requests are inconsistent with the Plan and are infeasible.  According to the Debtors' objection, the Plan provides for the Debtors to "make any distribution in [Cash] if no Distribution Agent is reasonably available to make a Liquid Cryptocurrency distribution to any particular creditor," and, they argue, the contract with Coinbase was limited to only 100 corporate creditors.   The Debtors also argue that the joinders are infeasible because the Debtors cannot continuously "true-up" creditors for every post-emergence shift in market prices.  The sheer number of joinders demonstrates why the compensation requested is strictly impractical and the Debtors add that the reverse situation could have occurred i.e. prices could have fallen post-emergence.

Summary of Court Hearing:

• Kirkland & Ellis (K&E) for the Celsius post-bankruptcy estate (Debtors) presented the distribution update (see slides filed on the court docket.  Key points:

1. Fiat distribution by Stretto has lagged significantly compared to the crypto distributions by Coinbase and PayPal.  Issues have included:
1. Accuracy problems with wire transfer details.
2. Some banks are unwilling to pay out funds originating in crypto and have simply returned the funds to the sender without wishing to complete the transaction for their customers.
2. Debtors are currently finalising negotiations with PayPal to act as an alternative distribution agent for fiat - this is expected to be operational in July.

• Before starting with the planned agenda, Judge Glenn stated that although the Faller Creditors’ motion will not be heard in the current hearing (it is scheduled for 29 July), he wanted to say:

1. He is taking the Faller Creditors’ motion with the many many joinders that have been filed very seriously and has spent considerable time studying the issues
2. He had a lot of questions and comments for the Debtor’s counsel (that he wanted them to consider for the forthcoming court hearing, including:
1. Apparently, the debtors’ counsel have received threats and the judge stated that there was a security officer present in the court and he hoped counsel felt safe - he stated (seconded by the US Trustee) that the court would not tolerate any threats.
2. Judge is not inclined to entertain procedural objections related to the Faller Creditors’ motion.
3. The motion principally concerns the Coinbase Prime agreement (doc. 3869) which makes no mention of any limit on the number of corporate creditors who could receive a distribution in crypto.
4. Also the sealed document providing fee details of the Coinbase Agreement makes no mention of any limit on the number of corporate creditors.
5. The “Distribution Addendum” states that “all institutional creditors shall establish a Coinbase Prime account and complete KYC.”  Again this makes no mention of there being any differential treatment of corporate creditors.
6. In their 2nd distribution update (Doc 4623), the Debtors mention that even though some corporate creditors already have Coinbase Prime accounts, these cannot be used.  However, the judge pointed out that in his reading of the Coinbase Prime agreement, it says that such accounts may be used.
7. The Debtors state in the distribution documentation that if there is no distribution agent available who can distribute in crypto then distribution will be made in fiat.  However, Judge Glenn points out that there was a distribution agent available (i.e. Coinbase) who could make distributions in crypto.  
8. Also the Judge asked why were corporate creditors not allowed to take distribution via the app.
9. The judge further asked, if there has been a breach of the Plan, what damages will it lead to and who will be liable.  Will it be Coinbase?  Did the Plan violate any Bankruptcy code provisions?
10. The judge asked how many corporate creditors there are.  K&E said there were several thousand many of whom were very small.  
11. K&E said in light of the Judge’s questions and comments, they would file a supplement to their objection.
3. Having asked all these questions, the Judge mentioned that he would allow counsel and any corporate creditors to order the transcript of this hearing to be able to review his questions and prepare for the forthcoming hearing.
4. Wesley Chang, on behalf of corporate creditors, thanked the judge for his comments and seriousness in this matter and mentioned that:
1. Social media is very alive to this issue
2. He would relay the judge’s seriousness on this matter to corporate creditors via social media.

• White & Case on behalf of the Litigation Administrator, updated the Court on the current status of litigation procedures:

1. So far 1,500 defendants have settled preference claims via the WPE process, representing over $500 million of exposures resulting in over $90 million in recoveries for creditors.
2. There is a statute of limitations of 2 years for preference actions - this will expire by mid-July.  The litigation administrator is expecting to file approximately 2,500 actions before then.
3. W&C stressed that the litigation administrator is looking to settle rather than to litigate and will be prepared to negotiate right up to the point where litigation begins in earnest on any case.
4. Judge Glenn commented that he had never had to adjudicate more than 2,000 such cases in any bankruptcy in his 20 years as a bankruptcy judge and suggested:
1. He would like to see the litigation administrator’s procedures proposal
2. He recommended naming 3-5 mediators that defendants could use who would become educated and skilled in the issues of this case (rather than having to deal with multiple mediators each having to get up to speed with the complexities).
3. He further recommended that the administrator categorise cases into groups for efficient handling
4. The judge stated he would allow defendants and their legal representatives to appear in court via Zoom if they cannot attend court in person.

• Fee Examiners 4th interim and final fee report:

1. Fee Examiner stated that all issues had been resolved with 20 advisers and their fee applications were recommended to proceed without objection
2. The fee application of RSM (auditor to the Debtors) was the only one that remains to be resolved.  This will be heard at the next court hearing.
3. Ms. Elise Frejka counsel for RSM introduced herself to the court and admitted that the RSM application was not entirely compliant and that she was working with the Fee Examiner to resolve the issues.

• And finally, the Debtor’s motion to strike the Voelker Appeal’s designation of items for discovery was upheld without objection.

TL:DR Summary & Next Steps…

• Webinar on Thursday 18th July 2024: Join our webinar to learn how to write off your Celsius claim or shares from a UK perspective. Register here.
• Celsius Recovery: If you have not yet received your first recovery, continue to push Celsius for updates.
• Ionic Digital SEC Application: We are awaiting updates on the Ionic Digital SEC application to go public. Bnk To The Future is prepared to support non-US creditors in taking delivery of their shares for holding or trading. More details on having Bnk To The Future take delivery for you here. 
• Litigation Committee Distribution: A distribution from the litigation oversight committee may occur in Q4 2024 / Q1 2025. Details on the payment method are currently unavailable but are expected to be similar to the last distribution.
• Alex Mashinsky Trial: His trial begins in January 2025.

I hope you are all maximising your recovery efforts. Onwards & upwards!