Crypto Lender Celsius Hires New Lawyers to Oversee Restructuring

Celsius has replaced its legal advisers after clashing with them over how to deal with the financial difficulties brought on by the recent crypto collapse.

The troubled crypto lender retained new lawyers from Kirkland & Ellis to advise on a possible restructuring after tensions arose with former lawyers Akin Gump Strauss Hauer & Feld, according to a person familiar with the matter.

Celsius hired Akin Gump in June to advise on a possible restructuring after it was forced to freeze withdrawals from its platform during a plunge in cryptocurrency prices, leaving customers unable to access their accounts.

But tensions emerged after Akin Gump spent several weeks advising Celsius’ top brass to file for bankruptcy, sources told Financial News at the time. Senior directors at Celsius instead wanted to explore other options including tapping its customer base for support.

Both Kirkland & Ellis and Akin Gump have been approached for comment.

That plan involved using the Celsius app’s “HODL” function to ballot customers over whether they still believe in keeping the company open. The end goal would be to reopen withdrawals, but with a monthly limit on how much customers can take out, in an attempt to protect against a run on Celsius’ assets.

The person familiar said the new Kirkland & Ellis lawyers were “more receptive” to the company’s plans to avoid filing for bankruptcy. Kirkland & Ellis is also acting as restructuring counsel for fellow crypto lender Voyager Digital, which did end up filing for bankruptcy on 6 July.

The legal adviser switch comes as Celsius was also hit with a lawsuit from asset manager KeyFi on 7 June, which alleged in a New York state court that the lender defrauded customers by using the cryptocurrency they had deposited to inflate its own token’s value.

KeyFi was Celsius’ investment manager from August 2020 to March 2021, but has now kicked off a row between the two firms by suing the lender in an attempt to recoup profit-sharing payments it says it is owed.

The lawsuit claims that Celsius boss Alex Mashinsky owned hundreds of millions of dollars worth of the CEL token at its peak, and therefore personally benefited from its inflated value.

KeyFi accused Celsius of operating as a “Ponzi scheme”, while KeyFi CEO Jason Stone alleged the lender owes him “millions of dollars” after failing to honour what he called a “handshake” profit-share agreement on a series of investment strategies.

Celsius did not respond to requests for comment. In June, it said in a blog post that it was taking “important steps to preserve and protect assets and explore options available to us.”

“Our relationship with the community and our clients has been a source of pride for all team members at Celsius, and we will continue to share information with our customers as and when it becomes appropriate,” the company stated at the time.

Related Reading:

Voyager Bankruptcy: Will Locked Account Holders Receive Their Funds?

What Happens If Crypto Exchanges Such as Celsius or Coinbase Goes Bankrupt?