Bankrupt Celsius to Spend $24M from GK8 Sale on Legal Expenses Related to Crypto

Celsius Network’s Debtors Reach Settlement

The debtors of the bankrupt cryptocurrency lending firm Celsius have requested the court to grant relief in the motion related to the distribution of funds from the sale of its self-custody platform GK8.

On July 17, the Series B holders of the Celsius Network agreed on a settlement to distribute $25 million from the proceeds of GK8’s sale. This agreement was made between the debtors, the creditors’ committee, and the initial consenting Series B preferred holders.

The shareholders proposed allocating $24 million for crypto-related expenses such as blockchain and web 3.0, the federal reserve, voyager crypto exchange, and Tesla AI Day. The remaining $1 million was to be distributed among the holders.

The Settlement Agreement and GK8 Acquisition

The debtors agreed to and remain supportive of the proposed allocation which was designed to reduce administrative costs, as stated in the court document. This settlement agreement was made out of a mutual desire to avoid litigation and a lengthly confirmation process with increased professional fees.

In late 2021, Celsius acquired the Israeli self-custody startup GK8 for $115 million. However, due to Celsius’ collapse in 2022, the debtors were required to sell GK8. In February 2023, Galaxy Digital, led by Mike Novogratz, won the bidding to purchase GK8 for $44 million. As part of the acquisition, Galaxy Digital gained access to GK8’s team of 40 experts, including cryptographers and blockchain engineers, and an office in Tel Aviv. In July 2023, GK8 held a meeting with financial executives in its New York offices.

The latest reports indicate that Celsius is currently facing a series of legal difficulties. On July 13, the U.S. Securities and Exchange Commission launched a lawsuit against Celsius, while the former CEO Alex Mashinsky was arrested. The U.S. Federal Trade Commission also imposed a $4.7 billion fine on Celsius on the same day.

Mashinsky entered a plea of not guilty to the charges of deceiving customers and increasing the value of the Celsius (CEL) token, and was released on a $40 million bail.