Small Business Creditors Call for Full Reimbursement Following a 35 Reduction in Celsius Claims

A married couple who had corporate accounts with Celsius are requesting a second payment from the bankruptcy settlement. They argue that they, along with other creditors, were given a 35% reduction in payment compared to those with non-corporate accounts.
The motion was submitted on June 3, and a hearing is scheduled for June 27 to review it. The couple claims that Celsius debtors delayed payments to corporate accounts and paid them in cash instead of cryptocurrency, resulting in losses for the creditors.
The motion asks for approval for further distribution of funds according to the Celsius bankruptcy plan. The four companies, BFaller RD, BFaller ROTH RD, SFaller TRD RD, and SFaller RD, collectively known as the “Faller Creditors,” are IRAs owned by Sheri Anne Faller and Bernard Jacob Faller. These IRAs had over $1 million worth of cryptocurrency in their Celsius accounts prior to the bankruptcy petition date. According to the negotiated bankruptcy plan, this amount was reduced to $634,337.93 worth of Bitcoin (BTC) and Ether (ETH) to be paid out on Jan. 16. However, the debtors allegedly failed to make the payments by the deadline.
Despite agreeing to be paid the cash value of the cryptocurrency held, the creditors claim they were not paid. They demanded payment in crypto on Feb. 13, but the debtors refused. They finally received a wire transfer of $414,733 on Feb. 22 but were not allowed to withdraw the funds until March 8. They received additional payments totaling approximately $219,602 on April 22, bringing the combined total to $634,335. The creditors argue that the cash value of these payments is far less than the value of the BTC and ETH they were owed and are demanding an additional $338,611 plus interest payments of $11,984, totaling $350,596.
The Faller creditors are not the only ones complaining about the treatment they received from Celsius. In March, a director of a corporate creditor claimed they had received 30% less than agreed under the plan. In response, Celsius Estate stated that they had sold users’ cryptocurrency on Jan. 16 and could not pay creditors crypto they no longer held. Additionally, they claimed that corporate accounts have a more demanding compliance process, preventing them from obtaining accounts for most corporate creditors.
The new filing disputes these claims, stating that the estate failed to use commercially reasonable efforts to make distributions and could have used cryptocurrency exchanges Kraken and Bitgo for distributions instead of Coinbase and PayPal. The filing also criticizes the three-month delay between converting the crypto to fiat and making the payments, calling it unreasonable.
Another Celsius corporate creditor, Wesley Chang, is also claiming losses due to payment delays. An omnibus hearing is scheduled for June 27 to address these issues. Celsius, a crypto lending platform founded in 2017, stopped processing withdrawals in June 2022, trapping an estimated $2.8 billion of customers’ cryptocurrency. Its founder and former CEO, Alex Mashinsky, has been indicted on seven counts of fraud for his role in the platform’s collapse, with a trial scheduled for September. After filing for bankruptcy in July 2022, Celsius has paid out more than $2 billion of creditor claims, according to a Feb. 15 court filing from the platform’s estate.