Creditors of the bankrupt crypto lender Celsius who withdrew substantial sums from the platform prior to its bankruptcy declaration may face the obligation to return a portion of those funds or potentially encounter legal actions.
On January 9th, administrators overseeing Celsius’ bankruptcy filed an intent to notify its creditors. The notice stated that account holders who withdrew more than $100,000 within 90 days before Celsius declared bankruptcy on July 13, 2022, might be required to return these funds.
According to the filing, account holders with “withdrawal preference exposure” exceeding $100,000, who are not excluded parties, did not vote against the reorganization plan, and did not opt out of releases, can settle their liability by paying 27.5% of the withdrawn funds by January 31, 2024.
Those interested in settling their accounts should submit an election form by January 25, indicating their intent to make the settlement payment. Account holders who settle will receive a release from all avoidance actions and distributions under the reorganization plan.
However, those who do not settle by the deadline will have their withdrawal preference exposure addressed by administrators and may face potential lawsuits to recover the preferences they received.
The filing stated, “Any Withdrawal Preference Exposure that is not settled by January 31, 2024, will be addressed by the Litigation Administrator after the Effective Date through separate correspondence or other action.”
In late November 2023, Celsius administrators allowed eligible participants to withdraw some of their cryptocurrency holdings. Celsius has been actively unstaking and withdrawing Ethereum to prepare for timely distributions to creditors. Currently, Ethereum makes up 20.3% of the withdrawal queue, with 112,037 Ether valued at approximately $266 million, according to Nansen data.
In November 2023, the company unveiled a scaled-back post-bankruptcy strategy centered on Bitcoin mining, which was subsequently approved by the judge overseeing the bankruptcy proceedings at the end of December.
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