Loading...

Celsius faces court battle over alleged corporate structure deception

celsius

Most read

Loading Most Ready posts..
Share link:

TL;DR

  • Bankrupt crypto lender Celsius has sought to merge its U.K. and U.S. entities, but court filings allege that the distinction between the two was a “sham.”
  • The filing argued that the two entities should be treated as one for bankruptcy purposes.
  • The allegations against Celsius highlight the importance of proper record-keeping and transparency in corporate structures.

Crypto lender Celsius is facing accusations of poor record-keeping in its corporate structure and a court battle between its customers and Series B investors. The firm has sought to merge its U.K. and U.S. entities, but court filings allege that the distinction between the two was a “sham.” 

In 2021, the company established a Limited Liability Company in Delaware and attempted to transfer assets through a series of financial transactions. However, this resulted in “intercompany chaos” and “sorely lacking” internal records, making it difficult to disentangle each entity’s affairs.

While regular customers were misled by management and didn’t understand the implications of this transfer, more sophisticated Series B investors were well aware of deficient record keeping. The filing argued that the two entities should be treated as one for bankruptcy purposes, a claim supported by parallel filings from a committee of Celsius’ creditors, who alleged that the reorganization was a “sham” and a “façade.” They argued that the billions of dollars transferred between the two entities were fraudulent, implying that they should be disregarded by the New York court that is attempting to restore funds to creditors.

Celsius allegations 

This situation is not unique to Celsius, as FTX faced similar accusations. Attorneys described the bankrupt crypto exchange as a “digital Potemkin village” whose slick front end disguised a messy and ill-governed reality. In a March 9 opinion, Judge Martin Glenn found that customers only had claims against the Delaware LLC entity, increasing the chances that Series B preferred equity holders could recoup some of their investment, which would normally be downgraded under bankruptcy law.

The allegations against Celsius highlight the importance of proper record-keeping and transparency in corporate structures. Poor governance can lead to confusion, chaos, and legal disputes that harm investors, customers, and creditors. The complex and opaque nature of the cryptocurrency industry only exacerbates these issues, making it essential for companies to prioritize good governance practices. As the cryptocurrency market continues to grow and evolve, regulators and investors alike must demand more transparency and accountability from industry players.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

Share link:

Lacton Muriuki

Lacton is an experienced journalist specializing in blockchain-based technologies, including NFTs and cryptocurrency. He dabbles in daily crypto news rich with well-researched stats. He adds aesthetic appeal, adding a human face to technology.

Stay on top of crypto news, get daily updates in your inbox

Related News

Elon Musk
Cryptopolitan
Subscribe to CryptoPolitan