Celsius Network Requiring Withdrawals Made 90 Days Before Bankruptcy for Repayment
Celsius Network, a bankrupt crypto lender, has issued a notification to its creditors regarding customers who made significant withdrawals in the 90 days leading up to the bankruptcy declaration. These customers may be required to return a portion of the funds or face legal consequences.
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Clawbacks for Substantial Withdrawals
The notice, published by Celsius bankruptcy managers on January 9, states that account holders who withdrew over $100,000 in the 90 days prior to July 13, 2022, the date Celsius filed for bankruptcy, are subject to clawbacks. Recipients of forthcoming letters will be instructed to make a payment equivalent to 27.5% of the amount withdrawn during the specified period. Compliance with this request will render them eligible for future distributions under the reorganization plan.
According to a report from The Block, Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog law firm, highlighted that the notice is directed at individuals with preference exposure exceeding $100,000, allowing them to “preemptively settle with the estate.”
Users who withdrew less than $100,000 in the months leading up to the bankruptcy are not required to return the funds, but they still need to vote in favor of the plan and refrain from opting out of the releases outlined in the plan. Failure to comply with these instructions could lead to potential lawsuits against non-compliant individuals.
Celsius’ Bankruptcy Filing
Celsius Network filed for Chapter 11 bankruptcy following the collapse of the Terra blockchain ecosystem in mid-2022. The company noted at the time that it had anywhere between $1 billion and $10 billion in assets and liabilities and more than 100,000 creditors. Customer accounts on the platform had been frozen for about a month by the time the firm filed for bankruptcy.
Alex Mashinsky, Celsius Network’s former CEO, resigned from his position in June 2023. The former CEO was arrested in July the same year but remained free on a $40 million bail. Mashinsky is set to face a criminal trial beginning on September 17, 2024.
For users affected by these developments, careful attention to the notices and compliance with any instructions provided will be crucial in navigating the impact of Celsius Network’s bankruptcy on their financial holdings.
