Now that their bankruptcy filing is a few weeks behind us, we provide below an update on certain matters of interest in the case of Celsius Networks and its affiliates. Of course, it’s still very early in the bankruptcy case — and in cryptocurrency cases in general — but we have already heard from many distressed opportunity investors that are interested in identifying investment opportunities. Given the novel legal and difficult valuation issues involved, it will be important to keep a close eye on the developments in these proceedings.

In a matter of first impression relating to an important bankruptcy claims administration issue, Judge Sean H. Lane of the United States Bankruptcy Court for the Southern District of New York, recently denied the ability of a court appointed claims agent to sell and profit from providing direct access to publicly available claims register information. The unsuccessful purchaser of such information was XClaim Inc. (“Xclaim”), a relatively new venture that is seeking to develop a web-based claims trading platform.

The Grand Court of the Cayman Islands (Court) has confirmed that the Court has the jurisdiction to grant declaratory relief within winding-up proceedings (In the Matter of Polarcus Limited (In Official Liquidation) (Unreported, Justice Kawaley, 23 June 2022 Cause No: FSD 31 of 2021 (IKJ)).

This is welcome clarity for insolvency practitioners and other stakeholders in winding-up proceedings where such declaratory relief may be required and the relief cannot for some reason be included in a standard sanction application.

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First-instance court
CICA
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Seahawk China Dynamic Fund: winding up on just and equitable grounds

In a recent decision, the Grand Court of the Cayman Islands grappled with the question of whether the need for an investigation into the affairs of the company is a stand-alone ground for winding up. While the Court did not determine the question conclusively, it did provide an indication of how it may rule if the issue were to be placed squarely before the Court again.

In the Matter of Seahawk China Dynamic Fund

The approach of the Cayman Grand Court to the terms and timing of the discharge of provisional liquidators of In the Matter of Star International Drilling Ltd (unreported, FSD 88 of 2021 ASCJ) may provide a window into what is expected to be a similarly flexible approach to the appointment of restructuring officers.

Star International Drilling Ltd's application to discharge its joint provisional liquidators

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The first week of July has brought with it a flurry of activity in the digital asset markets – but not the type of activity that investors in the space likely hoped for.

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Primacy of courts in place of incorporation
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Celsius Networks (“Celsius”) became the latest cryptocurrency platform to raise market temperatures by halting all withdrawals, swaps and transfers from and between its customers’ accounts on June 12, 2022. Celsius touted a next wave of “unbanking,” operating a lending platform allowing the holders of digital assets the opportunity to earn a significantly high returns on those assets.