Crypto lender Celsius has been embroiled in a court fight over the mingling of its UK and US entities. Court filings allege that the distinction between the two entities was a “sham” and that billions of dollars transferred between them were fraudulent.
The firm has faced accusations of poor record-keeping in its corporate structure, with a lack of internal records making it difficult to disentangle each entity’s affairs.
In 2021, Celsius set up a Limited Liability Company in Delaware and sought to transfer assets through a series of financial transactions, which regular customers were not fully informed of.
The court fight has pitted Celsius customers against Series B investors, with parallel filings by a committee of Celsius’ creditors arguing that the reorganization was a “sham” and a “façade.”
Judge Martin Glenn found that customers only had claims against the Delaware LLC entity, but Celsius is now arguing that the two entities should be “substantively consolidated,” merging assets and customer claims. The firm filed for bankruptcy in July 2022, and an auction of its assets is scheduled to continue.
Celsius’ situation echoes claims made about other crypto firms, such as FTX, which have been accused of having slick front-ends that disguise messy and ill-governed realities.
The court fight highlights the need for proper record-keeping and transparency in the crypto industry, as well as the potential risks of mingling different entities.