Celsius highlighted that the previous migration of two entities was total "intercompany chaos."
Bankrupt crypto lender Celsius Network is considering merging its United States and United Kingdom entities, while some creditors claim the distinction between the two was a "sham."
The heart of the matter lies in Celsius Network Limited (CNL) receiving a warning in June 2021 from the UK's Financial Conduct Authority to halt operations.
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In response, CNL established a Limited Liability Company (Celsius Network LLC) in Delaware, shifting its assets to the new company.
The migration, as stated in a May 1st court filing, was "intercompany chaos," with proper documentation of their relationship taking months to complete and remaining ambiguous regarding the affected transactions.
The ordinary investor was left scratching their head over the implications of the transfer, while the "sophisticated" Series B investors knew full well what was at stake.
The court filing argues that both entities should be treated as one in bankruptcy proceedings, ensuring that smaller creditors aren't left out in the cold when it comes to recovering lost funds.
In a parallel court filing by the Celsius Official Committee of Unsecured Creditors (UCC), the migration was labeled a "sham," suggesting that the transactions transferring billions of dollars worth of crypto between the two entities were likely fraudulent.
On May 2nd, Simon Dixon, who lost over $8.8 million in Bitcoin (BTC) due to the Celsius collapse, summed up the UCC filing in a Twitter thread, stating that "Celsius acted as if the migration never occurred" and offered "poor documentation" and "no clear distinctions" between the two companies.
It is worth noting that the auction for Celsius' remaining assets is set for May 3rd, with major firms such as Coinbase and Gemini competing for the defunct company's assets.
The tangled mess of Celsius Network's merging of its UK and US entities has left many creditors feeling betrayed and frustrated, with the hope of recovering their lost funds hanging by a thread.
