Celsius Network Files 'Adversary Complaint' Against EquitiesFirst

Bankrupt crypto lender Celsius Network has taken legal action against EquitiesFirst Holdings, a private lending firm, in an attempt to recover assets.

According to a sealed adversary complaint filed on September 6, Celsius Network seeks injunctive relief and a declaratory judgement related to the "recovery of money/property." The complaint names both EquitiesFirst and its CEO, Alexander Christy, as defendants.

EquitiesFirst Holdings, an Indianapolis-based private lending company, reportedly owed Celsius Network a substantial $439 million as of July 2022. Celsius had initially turned to EquitiesFirst for collateralized loans in 2019 to support its operations due to the perceived lack of institutional lending available to cryptocurrency companies at the time.

However, in July 2021, Celsius Network attempted to retrieve its collateral from EquitiesFirst but was informed that the lender could not return the provided amount. By July 2021, the debt had risen to a total of $509 million due to the over-collateralization of the loans. Since September 2021, EquitiesFirst has been slowly repaying the debt at a rate of $5 million per month. As of July 2022, the outstanding debt consisted of $361 million in cash and 3,765 Bitcoin.

Celsius Network faced significant challenges during the 2022 bear market and subsequently filed for Chapter 11 bankruptcy protection later that year. Former CEO of Celsius, Alex Mashinky, was also arrested. Authorities accused him of misleading Celsius users and defrauding investors out of billions of dollars.

The Federal Trade Commission had imposed $4.7 billion in fines on Celsius for allegedly deceiving users, but this judgement was suspended to allow the platform to use the assets as part of its bankruptcy proceedings.

Currently, creditors of Celsius Network are voting on a settlement plan that, if approved, would involve a consortium called Fahrenheit purchasing Celsius' assets and returning funds to Celsius creditors through the establishment of a new company.