Crypto lender Celsius Network has taken legal action against EquitiesFirst Holdings by submitting an “adversary complaint” in an attempt to recoup assets from the private lender. The complaint states that EquitiesFirst owes Celsius $439 million, consisting of $361 million in cash and 3,765 BTC as of July 2022. Celsius is seeking injunctive relief and a declaratory judgment related to the recovery of money and property.
The Background of EquitiesFirst Holdings
Founded in 2002, EquitiesFirst specializes in long-term asset-backed financing and primarily manages stocks. However, in 2016, the company expanded its services to include crypto-collateralized loans. Celsius sought financial assistance from EquitiesFirst in 2019 to support its operations. Unfortunately, the overcollateralized crypto loan faced difficulties by 2021.
In July 2022, it was revealed that EquitiesFirst was the undisclosed debtor owing $439 million to Celsius. This substantial debt led Celsius to take legal action against the private lending platform. The complaint lists EquitiesFirst and its CEO, Alexander Christy, as defendants in the case.
The Legal Steps Taken by Celsius Network
Alongside the adversary complaint, Celsius also submitted a summons mandating that EquitiesFirst respond within 35 days. This legal action demonstrates Celsius’s determination to recover the owed money and assets.
Celsius Network’s Recent Troubles
Celsius Network faced significant challenges in the cryptocurrency market when it sought Chapter 11 bankruptcy protection in July 2022. The company’s co-founder and former CEO, Alex Mashinsky, was later arrested and charged with securities fraud and the manipulation of the CEL token. Additionally, the Federal Trade Commission imposed a $4.7 billion fine on Celsius for allegedly deceiving users, although the judgment was temporarily halted to accommodate the incorporation of these funds into the bankruptcy proceedings.
In mid-August, Judge Martin Glenn of the Southern District of New York Bankruptcy Court approved a motion that allows Celsius creditors to vote on a proposed settlement plan. If approved, the plan would involve a consortium called Fahrenheit acquiring Celsius’s assets and establishing a new company to reimburse the creditors. This settlement plan offers the potential for financial recovery for Celsius and its creditors.
The Future of the Legal Battle
As the legal battle between Celsius Network and EquitiesFirst Holdings unfolds, it remains to be seen how the court will rule on the case. Celsius is adamant about recovering its owed assets, and EquitiesFirst will likely mount a defense against the adversary complaint. The outcome of this legal dispute will significantly impact both companies and potentially set precedents in the crypto lending industry.
The legal dispute between Celsius Network and EquitiesFirst Holdings highlights the complex nature of the cryptocurrency lending market. Celsius’s efforts to recover its owed assets demonstrate its commitment to protecting its interests and those of its creditors. As the case progresses, the industry will closely watch the outcome and its potential implications for future crypto lending transactions.