Celsius secures court approval for Flare token airdrop for eligible users

The U.S. bankruptcy court in the Southern District of New York authorized certain customer withdrawals and airdrop of the Flare network's token (FLR) to eligible XRP holders.

According to a court order filed on January 24, eligible customers of the now-insolvent crypto lending firm will be able to partially recoup their losses by receiving an airdrop of Flare tokens. Under a prior agreement between Celsius and Flare, FLR can be distributed to Celsius users who owned at least one XRP during a December 2020 snapshot, Judge Martin Glenn ruled.

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Flare is a Layer 1 blockchain and oracle provider that initially aimed to build a smart contract protocol on XRP Ledger, a public blockchain developed by Ripple Labs. FLR token airdrop, originally scheduled for 2020, finally took place on January 9 after a two-year delay. About 4.28 billion tokens were distributed to qualified recipients who held XRP at the time of a snapshot, which recorded the state of the network at the given time.

The first airdrop constitutes 15% of the token’s total supply. For every XRP held, users received one FLR — and most opted to dump it, crashing the price from $0.07 down to $0.035, as per data from CoinGecko.

“The Debtors are authorized to credit the accounts of those account holders that held XRP on the XRP Snapshot with the amount of Flare Tokens to which those account holders are entitled based on eligibility determined as of the XRP Snapshot in accordance with the Distribution Scheme as set forth in the Flare Agreement, provided that if the Debtors credit such accounts in accordance with the Flare Agreement, Flare must comply with its obligations under the Flare Agreement, including the distribution of 150 million Flare Tokens directly to the Debtors,” Celsius’ bankruptcy judge ordered.

Furthermore, Flare is obliged to distribute 150 million FLR tokens directly to Celsius, which, in turn, must promptly inform the Committee’s counsel about any additional FLR airdrop.

Another court order filed the same day permits Celsius to return funds to creditors who deposited them on the platform after the company filed for Chapter 11 bankruptcy on July 14, 2022. The withdrawals above $40,000 would need additional approval, as well as withdrawals from accounts that received more than $200,000 from Celsius 90 days before the bankruptcy.

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“The Debtors are authorized to return cryptocurrency transferred to the Debtors after the Petition Date (the “Postpetition Transfers”) subject to the terms of this Order; provided that the return to any Postpetition Transferor of Postpetition Transfers in excess of $40,000 in the aggregate shall require the consent of the Committee if such Postpetition Transferor received transfers from the Debtors in excess of $200,000 in the aggregate during the ninety-day period prior to the Petition Date (i.e., on or after April 14, 2022),” the filing read.

Besides the FLR airdrop, there may be another Celsius token on the horizon. According to Bloomberg, Celsius is considering issuing a bankruptcy crypto token to repay its debts, as reorganizing the company into a public-traded one will raise more money for creditors as opposed to liquidating its assets at today’s prices Celsius’ attorney Ross M. Kwasteniet told Judge Glenn.