Back in mid-July, a $1.2 billion “hole” was found in Celsius’ balance sheet, and notably, the crypto lending firm owed most of its liabilities to its users. Back then, Chief Executive Alex Mashinsky said the basis of the contract between Celsius and its users explicitly stated that the company has ownership rights over customer deposits, as well as the right to lend, sell, transfer or use them for any period of time.
The same was perceived to be controversial by people from the space, and users have been demanding their trapped funds back from Celsius. As reported recently, an ad hoc group urged the New York Bankruptcy Court for the Southern District of New York to permit repayment of their funds. The group entailed about 64 individuals who reportedly held about $22.5 million in crypto on the platform.
However now, another questionable development has been divulged.
Celsius’ Leon declares his equity to be ‘worthless’
A recent declaration of status document submitted to the United States Bankruptcy Court by Kirkland & Ellis LLP revealed that Celsius Co-Founder Daniel Leon had declared that his 32,600 common shares of Celsius’ common stock were now considered worthless. The “substantial shareholder” had, notably, acquired the shares on 11 February 2018.
Per the United States’ Internal Revenue Service, a stock is considered to be worthless when a taxpayer can show that the security had value at the end of the year preceding the deduction year, and that an identifiable event caused a loss in the deduction year.
However, it is essential to also note that just because an issuing company has filed bankruptcy, it does not always mean its stock is worthless in that year. The company could be in reorganization, or the stock might not be worthless until a later year.
Here it is worth recalling that Celsius had halted withdrawals from its platform due to “extreme market conditions” in June, while in July, it had flied for Chapter 11 bankruptcy.
Tweeting along the lines of what exactly the said move could mean, Angel Investor and BankToTheFuture CEO Simon Dixon said,
“I guess this is the official update that Celsius Network shares are officially worthless & the co-founder wants to use them as a tax write-off. At least shareholders understood the risks though it’s still painful for the community that invested in them.”