Celsius successfully emerged from Chapter 11 bankruptcy on January 31, 2024, after initially shutting down it's operations in mid-2022. Its mobile app and website were shut down on February 29th, 2024, while eligible former users of Celsius began receiving reimbursements of a percentage of their assets in early 2024. Read on below for a breakdown of the proceedings and how you can claim bankruptcy losses from Celsius on your taxes.
Jump Ahead:
Depending on the type of account you had with Celsius, some users will receive distributions in cryptocurrency, US dollars, or equity shares in Ionic Digital LLC, the reorganized mining business established by Celsius following their bankruptcy. For further details on Ionic Digital LLC, or for all other inquiries related to the specifics of Celsius's bankruptcy, please visit Stretto.
Breakdown of the reimbursement distributions
As of February 2024, Celsius is now rolling out distributions to affected users in three phases:
Celsius is reimbursing some users 57.9% of their funds in the form of BTC and ETH.
If you held any altcoins in your Celsius wallet (coins other than BTC and ETH) they will be liquidated into BTC and ETH and subsequently returned to you via PayPal or Venmo (if in the United States) and Coinbase (if outside of the United States).
Next, Celsius will allocate an additional reimbursement of 14.9% of funds in the form of stock in Ionic Digital, a bitcoin mining company set up as part of the bankruptcy agreement.
The remaining 6.4% of refunds will be allocated via an undisclosed process which is still pending litigation (as of February 2024).
Who will receive reimbursement distributions?
Former Celsius users who had Celsius Earn accounts will begin receiving reimbursements in early 2024.
Former Celsius users who had Custody accounts were eligible to withdraw their funds from the exchange in 2023, but that deadline has now passed.
How will I receive reimbursement distributions?
Distributions for former Celsius Earn account holders are being made through either Coinbase, Venmo or PayPal depending on your location.
United States residents will receive reimbursements through:
Non-U.S. residents will receive reimbursements through:
Taxability of Celsius Losses
Typically, you are required to dispose of your assets in order to claim any capital loss. For Celsius users, this means means that whether you can claim your Celsius gains or losses on your taxes depends on what assets you held in Celsius and whether you disposed of them.
We advise former Celsius users to determine which of the following two scenarios applies to their situation:
If you held BTC or ETH in your Celsius account and you receive that same asset back as part of your reimbursement, this is not a taxable event, and you will not incur a capital gain or loss. This is because one asset was exchanged for a smaller amount of the same asset. This can be recorded as a Bankruptcy Recovery transaction in CoinLedger.
NOTE: In order to claim a gain or loss on this transaction, you would then need to dispose of this BTC/ETH by selling or trading it away.
If you held a different asset other than BTC or ETH in Celsius but you received BTC/ETH back as part of your reimbursement, this IS a taxable event and will incur a capital gain or loss. This can be recorded as a Bankruptcy Liquidation transaction in CoinLedger.
So, if you you held BTC and/or ETH in your Celsius account and you received BTC or ETH back, you will likely not be able to write off this gain/loss on your taxes until you dispose of these assets. Please see this guide for more information.
What amount of my crypto will I receive back?
Some users may also be confused by the amount of an asset they are receiving back as part of the bankruptcy plan. Note that your reimbursement claim's value is tied to the US dollar value of the assets held in your Celsius account as of the date they filed for bankruptcy, July 13, 2022. In other words, this means that your claim is not based on the current market value of your assets, but their fair market value (FMV) as of July 13th, 2022. You can find a full list of FMV prices for crypto on July 13, 2022 (in USD terms) on Page 5 of this document.
How can I claim these bankruptcy losses using CoinLedger?
Former Celsius users who want to claim their bankruptcy losses on their taxes using CoinLedger can do so with the following transaction types: Bankruptcy Recovery and Bankruptcy Liquidation.
Head to the Import stage of the CoinLedger app, and select Add Account. Then, search for Celsius. Once you've selected a new Celsius account, click Add Transaction.
Next, you will need to create either a Bankruptcy Recovery or Bankruptcy Liquidation transaction depending on your situation. REMEMBER: whether you can claim your Celsius gains or losses on your taxes depends on what assets you held in Celsius and whether you disposed of them.
Which scenario applies to you? Follow the instructions below for each.
If you held BTC/ETH and you receive the same asset back, you would want to enter a Bankruptcy Recovery transaction into CoinLedger. Set the transaction's Timestamp to the date you received the distribution.
Example: If I had 1 BTC in Celsius and I receive back 57.9% of my BTC, I would enter 1 BTC as the Asset Sent and 0.579 BTC as the Asset Received.
The same would apply if I originally held ETH and I received ETH back as part of my reimbursement.
The date for the transaction would be the date I received my distribution on PayPal, Venmo or Coinbase (sometime in 2024).
Bankruptcy Recovery transactions are treated as a non-taxable swap by CoinLedger, meaning they do not trigger a taxable disposal event.
If you held any asset OTHER than BTC/ETH in Celsius and you receive BTC or ETH back, you would want to enter a Bankruptcy Liquidation transaction into CoinLedger. Set the transaction's Timestamp to the date you received the distribution.
Example: If I had 212,429 DOGE in my Celsius wallet and I received back 0.29 BTC (57.9% of my original DOGE), I would enter 212,429 DOGE as the Asset Sent and 0.29 BTC as the Asset Received.
The date for the transaction would be the date I received my distribution on PayPal, Venmo or Coinbase (sometime in 2024).
Bankruptcy Liquidation transactions are treated as taxable disposals by CoinLedger, meaning you will incur a capital gain or loss from this transaction.
Please note that if Scenario #1 applies to you, and you subsequently disposed of the BTC or ETH you received back from Celsius by selling or trading it away, you should import the wallet where that disposal transaction occurred in order for your gains/losses to be represented correctly in CoinLedger. If you don't import this data, your gains or losses from the Celsius bankruptcy won't be reflected properly in our software.
Disclaimer: The above transaction types related to bankruptcy recoveries and liquidations may not cover every bankruptcy scenario. We strongly recommend consulting with a tax professional before claiming bankruptcy losses on your taxes. CoinLedger is not liable for any improper use of such transactions in your individual tax filings.