July 18, 2023 at 14:40 GMTModified date: August 9, 2023 at 10:08 GMT
July 18, 2023 at 14:40 GMT

Celsius allots 96% of GK8 proceeds on legal fees

Bankrupt crypto lending firm Celsius is ready to spend a chunk of its GK8 sale proceeds on legal fees – $24million to be exact

Celsius allots 96% of GK8 proceeds on legal fees

The bankrupt cryptocurrency lending firm Celsius is ready to spend a chunk of its GK8 sale proceeds on legal fees. The whopping spending of $24million was revealed in a filing submitted by Celsius Network’s debtors on 17 July 2023.

Celsius had bought the Israeli self-custody platform back in 2021. However, following the firm’s collapse in 2022, it decided to sell GK8 as part of its restructuring plan.

The Israeli company provided financial institutions an on-premise end-to-end platform for safekeeping and managing digital assets. This start-up, which was bought for $115m, was then sold for $25m by Celsius.

The recent filing stated that Celsius’ Series B holders have agreed on a settlement to distribute $25m from the proceeds of GK8’s sale. This was a result of an agreement that was reached between debtors, the creditors’ committee and the initial consenting Series B preferred holders.

The shareholders have proposed allocating $24m for legal expenses. The remaining $1m will be distributed among the holders.

The document stated that the primary purpose of the settlement is to reduce administrative costs. The debtors therefore agreed to the same. The proposed allocation also provides the initial consenting Series B holders with reciprocal benefits.

The court document highlighted the “mutual desire” to avoid costly litigation in the legal process. There was also the possibility of this being a lengthy confirmation process with a corresponding increase in professional fees. The filing further noted: “The settlement not only unlocks tremendous value for the debtors’ creditors but also affords the debtors and all parties priceless certainty of the way forward. For the reasons set forth herein and the motion, the court should overrule the objections and grant the relief requested in the motion.”

Celsius is currently facing the hot seat for allegedly raising “billions of dollars” through unregistered and fraudulent offers, as well as selling “crypto asset securities”. On 13 July, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Celsius’ former CEO, Alex Mashinsky, for falsely promising investors a safe investment with its lending service known as the “Earn Interest Program”.

This was soon followed by the U.S. Federal Trade Commission (FTC) issuing a $4.7billion fine against Celsius the same day. In the FTC announcement, Celsius and its affiliate companies were to be permanently banned from “offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets”.

Back when Celsius had acquired GK8, its co-founder and COO Daniel Leon commented the move saying: “GK8’s capabilities will help Celsius and GK8 clients to enter new sectors in the blockchain space while maintaining and increasing cybersecurity capabilities, all of this while maintaining GK8’s status as an independent company. This is a significant step in the cryptosphere that is only growing and prospering.”

Soon after, GK8 was bought by Mike Novogratz-led investment firm Galaxy Digital in late 2022. By winning this bid, Galaxy acquired GK8’s team of 40 experts, including cryptographers and blockchain engineers, along with an office in Tel Aviv. However, it did not disclose how much it offered during the bidding process.