The equity stake owned by Celsius Network Co-founder Daniel Leon was declared worthless earlier this week.
Kirkland & Ellis LLP filed a declaration on behalf of Celsius Co-Founder Daniel Leon in the United States Bankruptcy Court on Monday, confirming his status as a substantial shareholder and declaring that his beneficial ownership of 32,600 common shares are now considered worthless.
— David Adler (@DavidJAdler1991) September 5, 2022
A declaration that a specific stock or common share is “worthless” typically occurs when shareholders in a company believe they will receive no further distribution for their holdings.
The IRS considers a stock to be worthless if a taxpayer can demonstrate 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.
The beleaguered cryptocurrency lender filed for Chapter 11 bankruptcy in July, a month after suspending withdrawals due to “extreme market conditions.”
In a Monday Twitter post, BnkToTheFuture CEO Simon Dixon suggested that the declaration means Celsius Network private equity shares are now “officially worthless,” and that the co-founder wants to use them as a tax write-off. But it is still unclear at this stage if the court declaration will have any impact on the value of the shares still in circulation.
BnkToTheFuture helped Celsius raise two rounds of private equity funds from smaller investors.
Meanwhile, it doesn’t seem to be the end of the line for Celsius Network’s cash runway. While a three-month cash flow forecast included in the court filings predicted that the company would run out of money by October, a new forecast appears to show that the company has gained some breathing room.
The most recent forecast, dated Aug. 31 and filed with the United States Bankruptcy Court on Tuesday, shows the company currently sitting on just over $111 million in cash, with $42 million remaining by the end of November.