Hey Hey Celsius creditors,

The Bnk To The Future team have three updates to share with you today regarding our additional Celsius recoveries:

• Update 1: An important update on Ionic Digital, some concerns about the board and our lawsuit against Alex Mashinsky and associates. Find out more about additional recoveries, ongoing litigation and what it means for us.
• Update 2:The Litigation Oversight Committee has released its Quarterly Report, detailing the latest progress and actions taken on our behalf.
• Update 3: A summary of the recent court hearing held on July 29, 2024. Key decisions and implications are covered to keep you informed.

Update 1: Ionic Digital & Lawsuit Against Mashinsky & Co

The communication from Ionic Digital has been significantly worse compared to other public Bitcoin miners so far. Three fellow creditors have addressed this issue in letters to Judge Glenn (filed on the court docket), which I highly recommend reading:

1. https://cases.stretto.com/public/x191/11749/PLEADINGS/1174908052480000000134.pdf
2. https://cases.stretto.com/public/x191/11749/PLEADINGS/1174908012480000000070.pdf
3. https://cases.stretto.com/public/x191/11749/PLEADINGS/1174908052480000000111.pdf

The letter in 1 above cites Brett Perry (one of the 2 creditor representative board observers together with Joe Lehr) who vents his frustration with the Ionic board: 

“Fellow Ionic shareholders, you've been kept in the dark too long. Let Judge Glenn and the press know. I'll ensure your voices are heard by the board & management. Reject the misuse of our money as a personal piggy bank and lack of respect shown to us all.”

As you know, I was appointed as one of the creditor representative board observers together with Brett and Joe, but I stepped down in protest against the board’s attempts to silence my voice.  I am glad to see that Brett has called out the board’s behaviour and is supporting creditors’ demands for Ionic to step into the light.  

Update Added 13th August 2024. 

Shortly after publishing the blog and the letters above, Ionic Digital released the following press release: 

Ionic Digital Issues Shareholder Update 

Unfortunately, this press release did not read well at all. As a result, I will be writing to the Judge again and exploring with other shareholders the options regarding calling a shareholder meeting. The situation is deeply concerning: Prusak is gone with no replacement in sight; the auditor has departed with no replacement in sight; Ionic Digital is delinquent on its financial filings to the SEC; and the Hut8 liquidity requirement provision has been removed from the managed service agreement. I expressed on social media that Matt Prusak had better not be receiving any bonuses under these circumstances!

I have written a letter to Judge Glenn in order to expedite a shareholder meeting due to a lack of confidence in the board. Here's the link to my letter.

I also joined this request for additional information by Tony Vejseli that was published on the same day.

Update Added 15th August 2024

One of the previous bidders, Mike Cagney from Figure, has proposed a plan for Ionic Digital shareholders and will be hosting an X Space to discuss the details.

You can read the proposal, as outlined in his letter to the board, here.

You can view the Figure plan in slide format here.

Register for the X Space or listen to the recording after the event via the following link.

As always I will keep you up-to-date as the situation unfolds. 

Also, in case you missed it, I discussed the latest updates on our lawsuit against Alex Mashinsky and others in a previous episode of BitcoinHardTalk. You can watch the full episode or jump to 31:13 for the relevant section: 

https://www.youtube.com/live/-zMWb_13kkw?si=mjLa-ncYJgKlzYgQ 

Update 2: Litigation Oversight Committee Quarterly Report (Doc 7568)

Summary

Reported Financial Status

Key Observations:

1. Cost Ratio = 15% based on Cash Cost so far = $22.4 million and Cash Received so far = $148.8 million.
2. Recovery Ratio: So far zero cash has been distributed
3. $71.9 million Avoidance Actions recoveries is cash received. A further $15.7 million has been settled but remains to be collected.
4. BRIC portfolio recoveries breakdown:
1. $4.2 million from liquid crypto 
2. $28.7 million from institutional loan collateral
3. $41.1 million other assets (including Core Scientific)

Important Note:

The LOC has modified the BRIC’s incentive fees.  No details of the changes have been provided.

The Bnk To The Future Team put together the following g summaries:

Current Adversary Actions Filed:

Settlements and Ongoing Mediations:

Celsius anticipates the next distribution to occur in December 2024, with an estimated additional recovery of 4.4%. We will provide further updates as soon as they become available.

Update 3: Summary of Court Hearing 29 July 2024

TLDR:

Distribution: 70% fiat has now been distributed due to the addition of PayPal Hyperwallet as a distribution agent.

Adversary Proceedings: 2,500 cases ongoing. Judge is looking to streamline the process via identification of common issues and 5-10 test cases while assuring that everyone will have the opportunity to be heard.

Faller Motion and Australian Corporate Creditors Motion: 

Judge Glenn is very troubled by these motions and their 40+ joinders.  His analysis of the documents shows no justification for the differential treatment of corporate creditors.  This means the Plan was likely breached (however, the Judge has not decided the issue yet).  The Judge asked the US Trustee to pursue this and for all parties (including the UCC) to work together on a single status paper that sets out all the positions on this issue.  The matter was adjourned for 1 month.

Detailed Summary:

Distribution Update:

1. Started using PayPal Hyperwallet to distribute fiat - this has raised successful distributions from 55% to 70%
2. Still to distribute to over 105,000 creditors:
1. 50k unredeemed codes at PayPal
2. 45k not set up Coinbase account
3. 10k have not passed Coinbase KYC

Adversary Proceedings:

1. Fabric Ventures - very close to settlement so the Litigation Administrator (“LA”) asked for a deferral of this hearing.
2. Sealing motions - The judge will agree to some aspects such as economic terms but will not agree to sealing in general (Celsius is no longer trading so no grounds for sealing on the basis of competition) - The Judge wants all proposed redactions to be filed to the court for review.
3. Preference Avoidance cases: There are 2,500 cases so Judge asked the LA to identify common issues and select 5 - 10 test cases to be brought in 3 weeks from now for the sake of efficiency, but the Judge will not limit anyone’s rights to be heard.  Serving court documents to defendants is ongoing. US cases have mostly been served, but it is much more difficult internationally (the split of cases is approx. 50/50).  
4. Two lawyers representing over 500 preference defendants introduced themselves (Troutman with 400+ defendants - about 25% of all those who have been served - and Bessacoff with 120 defendants).

Faller Motion and Australian Corporate Creditors Motion:

1. Saracheck representing Bernard and Cherie Faller stated that the Debtors did not follow the terms of the Plan: members of the same class were treated unequally. 40+ joinders have been filed.  The execution by the Debtors was not just unfair but also very very confusing.   There is zero proof that the Debtors were authorized to do this.  Saracheck proposed mediation to determine damages.
2. Laura Faller McNeil - daughter of the Fallers and manager of their retirement accounts said they should not have been put in the position of having to choose between fiat and crypto.  It was extremely confusing and unfair.
3. Frances Jones spoke as one of the 21 “Australian Corporate Creditors” said that she has sent numerous requests for assistance but received zero reply; she asked for a contact person to work on distribution. She has not received any distribution.
4. Paul Colgiuri (one of the “Australian Corporate Creditors”) also filed a joinder to te Faller Motion.  He was not given the option to choose fiat or crypto.  He noted that the Plan has $165m set aside to take care of contingencies, and asked why a tiny fraction of this sum could not be used to pay the $1,000 set up costs for the Coinbase corporate accounts. At the time of filing, none of the Australian Corporate Creditors had received any money, but subsequently 4 have received a distribution.
5. Wesley Chang emphasized that the Debtors did not follow the Plan and that the money was not paid timeously.
6. James Matthews (UK) stated that communication has been extremely poor.  Crypto sold on behalf of corporate creditors was not in the plan and there was no communication about the top 100 corporate creditors who would receive crypto.  He pointed out that he had set up his own corporate account with Coinbase without any $1,000 fee and the process was very simple, so he cannot understand the Debtors’ claims of complexity nor why the problem arose in the first place. Matthews has still not received any distribution.
7. Judge Glenn commented as follows: 
1. He was trying to be restrained but was finding it difficult.
2. He had previously asked the Debtors to do a supplemental filing. He found it very unpersuasive and troubling.  He would have expected the UCC to have taken a lead in such an issue that affected so many creditors but was surprised that the UCC had been silent on the matter.
3. Regarding the use of Coinbase as the in-kind distribution agent, Judge Glenn reviewed the Disclosure Statement, the Plan, and the Supplemental Disclosure Statements (including the Coinbase Prime Agreement) and found there just is NO provision for 100 corporate accounts getting crypto while the rest get fiat.  The documents provide that the Debtors were supposed to give distribution instructions to Coinbase.  That the Debtors had discretion in this matter was first mentioned only on the Deactivation Date (i.e. 90 days after the Plan went effective).  When Coinbase said they would only pay crypto to 100 corporate creditors no one told the Judge about it - the lawyers should have been in court telling the Judge all about it. 
4. Distribution Addendum - the mention in this document about discretion to treat creditors differently relies on a provision for abusive activity and not for the case in question.
5. He asked why the Debtors did not come and talk to him (Judge Glenn) about Coinbase’s reluctance to distribute crypto.  He asked why did he have to hear about it from a group of pro se creditors who had not received any answers to their questions.  
6. The Debtors pointed to their slide deck on distribution that mentions that only the top 100 Corporate Creditors would get crypto citing Article 4G in the Plan as the basis which states that in the event that there is no authorized distribution agent then fiat could be distributed. However, Judge Glenn pointed out that Coinbase IS authorized in many of the affected countries (e.g. Australia and the UK).
7. The Debtors stated that they had asked 250 corporate creditors to elect to receive either crypto or fiat in the hope of winnowing them down to only 100.
8. Judge Glenn said they breached the plan and “played hide the ball”
9. Judge Glenn further asked: Where was the Committee; when did they know about this? And he asked W&C to come back on this.  The Judge asked the USTrustee to focus on this issue and mentioned that he wants this to be “an open book” meaning if we need a hearing with witnesses, we will have it.  If there is going to be discovery on how the 100 limit was set, K&E will have to pay for it - it will not come out of the Debtors’ account (i.e. creditors will not pay for this).
10. The Judge stated that he was not satisfied with the answers he was getting and adjourned the Faller and Australian Corporate Creditors motions for 1 month.
8. Coinbase Counsel, Cleary Gottlieb, stated that the Distribution Addendum requires Coinbase to act upon instruction from Debtors to distribute.  Judge Glenn asked who came up with the 100 limit (it was not the Debtors).  CG answered that Coinbase never refused any instruction from the Debtors.
9. Conclusions/Next Step:  The Judge wants a status report from EVERYBODY involved presented in a single paper, which must contain everything.
10. Thomas Chernak, pro se, mentioned that he now has representation but filed late. The Judge said he would hear from everybody on this matter.
11. Chris Koenig asks everyone to write to him at his email, which is at the bottom of the front page of every document that has been filed on the docket.

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