Celsius to Pursue Fraud Claims Against UK-Based Subsidiary, CNL

  • Debtors of Celsius filed a motion for substantive consolidation of its UK and US entities.
  • There are currently allegations of significant deficiencies in record-keeping at Celsius.

Simon Dixon, the CEO of BankToTheFuture and a regular commenter on the bankruptcy case of the ill-fated crypto lender Celsius, has dropped another update regarding the ongoing court case.

Dixon revealed that while the auction continues today, a joint agreement has been reached between the firm and its Committee of Unsecured Creditors (UCC) to pursue and prosecute constructive fraudulent conveyance and similar claims against Celsius’ UK-based arm, CNL.

Notably, the US-based subsidiary, LLC, brought fraud claims against CNL to help determine what creditors and shareholders own.

Due to regulatory pressure, Celsius had to move its UK operations to the US in 2021, causing problems such as incomplete documentation, missing records of intercompany coin transfers, and poor record-keeping. On May 1, the debtors of the bankrupt crypto lender filed a motion to consolidate the two subsidiaries, LLC and CNL.

According to the court document, the flaws in the record-keeping made determining the intercompany claims chaotic and challenging. The debtors estimated that a complete reconciliation was impractical. They argued that CNL and LLC were too intertwined and that the cost of disentangling them would outweigh the benefits to all creditors.

Given the extent of the missing records, the debtors previously decided on two options: a complete reconciliation or substantive consolidation of the estates. They opted for the latter due to its time efficiency.

According to a tweet from BankToTheFuture CEO, the Committee of Unsecured Creditors supported the substantive consolidation, arguing that CNL and LLC have always been the same entity and the whole CNL to LLC transfer was a sham.

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