In re Celsius Network LLC

NOT FOR PUBLICATION

APPEARANCES:

KIRKLAND & ELLIS LLP, Attorneys for the Post-Effective Date Debtors, By: Patrick J. Nash, Jr., Esq., Ross M. Kwasteniet, Esq., Christopher S. Koenig, Esq., Dan Latona, Esq.

WHITE & CASE LLP Attorneys for the Official Committee of Unsecured Creditors, By: David M. Turetsky, Esq, Samuel P. Hershey, Esq, Joshua D. Weedman, Esq., By: Keith H. Wofford, Esq., By: Gregory F. Pesce, Esq.

By: Aaron Colodny, Esq.

OFFICE OF THE UNITED STATES TRUSTEE, By: Mark Bruh, Esq., Shara Cornell, Esq., McCARTER & ENGLISH, LLP, Attorneys for the Borrower Ad Hoc Group, By: David Adler, Esq.

VENABLE LLP Attorneys for Ignat Tuganov, By: Jeffrey S. Sabin, Esq. Andrew Currie, Esq.

TROUTMAN PEPPER HAMILTON SANDERS LLP, Attorneys for the Ad Hoc Group of Withhold Account Holders, By: Deborah Kovsky-Apap, Esq.

OFFIT KURMAN, P.A., Attorneys for the Ad Hoc Group of Earn Account Holders, By: Jason A. Nagi, Esq., By: Joyce A. Kuhns, Esq.

ERVIN COHEN & JESSUP LLP, Attorneys for Simon Dixon and BNK To The Future, By: David Tarlow, Esq., William Chistopher Manderson, Esq., Chase Aleksander Stone, Esq.

TOGUT SEGAL & SEGAL LLP, Attorneys for Ad Hoc Group of Custodial Account Holders, By: Kyle J. Ortiz, Bryan M. Kotliar, Esq. Pro se Creditor Jason Amerson Pro se Creditor Rebecca Gallagher Pro se Creditor Johan Bronge Pro se Creditor Immanuel Herrmann Pro Se Creditor Daniel Frishberg Pro se Creditor Cathy Lau.

MEMORANDUM OPINION GRANTING IN PART AND DENYING IN PART SUBSTANTIAL CONTRIBUTION APPLICATIONS

MARTIN GLENN, CHIEF UNITED STATES BANKRUPTCY JUDGE.

Currently pending before this Court are ten^[1] substantial contribution applications (the "Applications") filed in connection with the reorganization of Celsius Network LLC, et al. ("Celsius" or "Debtors"). The parties who filed Applications and amounts sought are as follows:

1. Ad Hoc Group of Custodial Account Holders ("Custody Group") through counsel Togut, Segal & Segal LLP ("Togut"). ("Custody App.," ECF Doc. # 3660.)

a. Fees Sought: $740,447.50

b. Expenses Sought: $0.00

2. Ad Hoc Group of Withhold Account Holders ("Withhold Group") through counsel Troutman Pepper Hamilton Sanders LLP ("Troutman"). ("Withhold App.," ECF Doc. # 3663.)

a. Fees Sought: $183,871.00

b. Expenses Sought: $3,745.61

3. Ad Hoc Group of Earn Account Holders ("Earn Group") through counsel Offit Kurman, P.A ("Offit"). ("Earn App.," ECF Doc. # 3654.)

a. Fees Sought: $326,262.00

b. Expenses Sought: $6,774.55^[2] for counsel and $4,830.82 for pro se participation related to the Class Claim Mediation^[3]

c. Future Fees sought: $100,000.00

4. Borrower Ad Hoc Group ("Borrower Group") through counsel McCarter & English ("M&E"). ("Borrower App." ECF Doc. # 3671.)^[4]

a. Fees Sought: $1,018,265.50

b. Expenses Sought: $1,957.97

5. Ignat Tuganov ("Tuganov") through his counsel Venable LLP ("Venable"). (The "Tuganov App.," ECF Doc. # 3666, supplemented by the "Venable Time Records," (ECF Doc. # 4010-1) and the "Suppl. Tuganov App.," ECF Doc. # 4158.)

a. Fees Sought: $1,577,949.50 ($1,383,089.00 pre-Confirmation and $194,860.00 post-confirmation)

b. Expenses Sought: $6,803.46

c. Future Fees Sought: $300,000.00

6. Simon Dixon ("Dixon") on behalf of BNK to the Future ("BF"), through counsel Ervin Cohen & Jessup LLP ("ECJ"). ("Dixon Declaration," ECF Doc. # 3670, "Dixon/BF App.," ECF Doc. # 3672, and amended at ECF Doc. # 3799, "Amended Dixon/BF App," together "Dixon/BF Apps.")

a. Fees Sought: $506,722.50

b. Expenses Sought: $20,982.20

c. Future Fees Sought: $50,000.00

7. Pro Se Daniel Frishberg ("Frishberg"). ("Frishberg App.," ECF Doc. # 3675.)

a. Expenses Sought: $626.98

b. Future Fees Sought: $1,000.00

8. Pro Se Immanuel J. Herrmann ("Herrmann"). ("Herrmann App.," ECF Doc. # 3674.)

a. Expenses Sought: $1,143.90

b. Future Fees Sought: $1,000

9. Pro Se Rebecca Gallagher ("Gallagher"). ("Gallagher App.," ECF Doc. # 3662.)

a. Expenses Sought: 20 ETH (as of 2/26/2024, equivalent to $63,633.8)

10. Pro Se Zachary Wildes ("Wildes"). ("Wildes App.," ECF Doc. # 3615.)

a. Expenses Sought: $42,525.00.

The following parties filed objections, summarized as follows:

1. United States Trustee ("UST"). ("UST Objection," ECF Doc. # 4018)

a. Omnibus objection to all Applications

2. Debtors filed:

a. A limited objection ("Debtors' Limited Objection," ECF Doc. # 4025)

i. Objecting to: the Wildes App., Gallagher App., Dixon/BF Apps., and Pending Withdrawal App.

ii. Supporting: the Earn App., Custody App., Withhold App., Tuganov App., Herrmann App., and Frishberg App. (and the Borrower App., for which it later retracted support).

b. An objection to the Borrower App., ("Debtors' Borrower Objection," ECF Doc. # 4179)

3. The Official Committee of Unsecured Creditors' ("Committee") filed:

a. A limited objection ("Committee Statement," ECF Doc. # 4027)

i. Objecting to: portions of the Dixon/BF Apps. ii. Supporting: The Earn App., Custody App., Withhold App., Borrower App., Gallagher App.,^[5] Tuganov App., and portions of the Dixon/BF Apps.

b. An objection joining the Debtors' Borrower Objection ("Committee Borrower Objection," ECF Doc. # 4183)

4. Pro Se Jason Amerson ("Amerson"). ("Amerson Objection," ECF Doc. # 4015)

a. Objecting to the Dixon/BF Apps.

5. Pro Se Cathy Lau ("Lau"). ("Lau Objection," ECF Doc. # 4043)

a. Objecting to the Dixon/BF Apps.

Parties filed responses in support of their applications as follows:

1. Tuganov filed the "Tuganov Reply," ECF Doc. # 4184

2. The Earn Group filed the "Earn Reply," ECF Doc. # 4185, and the "Kuhns Declaration," ECF Doc. # 4187

3. The Withhold Group filed the "Withhold Reply," ECF Doc. # 4186

4. The Custody Group filed the "Custody Reply," ECF Doc. # 4188

5. Dixon/BF filed the "Dixon/BF Reply," ECF Doc. # 4189

6. Gallagher filed the "Gallagher Reply," ECF Doc. # 4191

7. Frishberg filed the "Frishberg Reply," ECF Doc. # 4193

8. Herrmann filed the "Herrmann Reply," ECF Doc. # 4194

The Court has determined that certain matters and actions constituted substantial contributions while others did not. While the actions of ad hoc groups advancing their interests and the interests of similarly situated creditors typically do not qualify as substantial contributions, this case was unique in many respects, and their role in coordinating the interests of hundreds of thousands of creditors, and facilitating the orderly progression of the case, was a significant factor in ultimately confirming the Plan. In the words of the Debtors' counsel:

[T]his is an extremely unique case for a variety of reasons . . . other than the Committee, there were no represented parties and the vast majority of the creditors here are unsophisticated retail investors, over 600,000 of them. And so from the very early stages of the case, we as the Debtors were focused on how are we ever going to confirm a plan, how are we ever going to get support of retail investors . . . [when] there is not somebody that we can go to as a conduit who is representing them. . . . The first six months of the case there were so many individual pro se motions largely from Earn account holders . . . we were trying to put a tent around the circus and tried to streamline it into one proceeding. . . . [T]hat was incredibly inefficient, led to dozens of objections, required many depositions, required testimony of witnesses and ultimately was a very expensive endeavor. And importantly, the Earn Ad Hoc Group was not there for that. . . . The Custody and Withhold experience was different because . . . [the creditors] felt like they had a voice. They felt like they had somebody that was representing them. And I think that it ultimately inured to the benefit of the estate and reduced the cost of the estate that we had one streamlined litigation with a represented party who was representing the interest not only of their specific clients, but of similarly situated clients. And I think given the administrative run rate of these cases, the cost that we would have all

incurred to deal with what certainly would have been many more pro se motions, letters, objections, was significantly reduced.

In a normal Chapter 11 case, I would be offended if an ad hoc group filed a substantial contribution motion because I would say they're doing what they did in order to advance their own interests. . . . [U]nder the American judicial system parties ordinarily bear their own expenses. This case is different. We would not be standing here today if not for these parties because I'm not sure that we would have gotten support for any Chapter 11 plan. . . . [The settlements] are the cornerstones of the Plan.

(Jan. 11, 2024 Hr'g Tr. 64:15-25, 65:1-17, 66:1-11, 67:12-23.)

Accordingly, the Court finds that certain efforts, including those in furtherance of these "cornerstone" settlements, constitute substantial contributions. Several Applications requested fees for post-confirmation activities. All of the activities which constituted substantial contributions occurred prior to confirmation; therefore, there are no awards for any post-confirmation activities.

The Court GRANTS IN PART the Custody App., the Earn App., the Withhold App., the Tuganov App., the Dixon App., and the Frishberg App. The Court DENIES the Borrower App., the Herrmann App., the Gallagher App., and the Wildes App. Exhibit A attached to this Opinion includes the amounts awarded with respect to each application....