Celsius Seeks to Recoup Pre-Bankruptcy Withdrawals from Creditors

Jimmy Aki
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Bankrupt crypto lending firm Celsius has filed an intent to reclaim funds from customers who withdrew over $100,000 in the 90 days preceding its bankruptcy declaration.

27.5% of Withdrawn Funds to be Returned By Month-End

On January 9, 2024, administrators overseeing Celsius’ bankruptcy proceedings took a significant step by filing a legal intent to notify creditors of potential actions.

This particularly impacts account holders with “withdrawal preference exposure” exceeding $100,000 who chose not to reject the reorganization plan or opt out of releases.

Creditors are now required to either settle their liability by remitting 27.5% of the withdrawn funds by January 31, 2024 or potentially face legal consequences.

To settle, they must express their intent to pay by submitting an election form before the deadline on January 25. Compliance will result in being released from avoidance actions and eligibility for distributions outlined in the reorganization plan.

However, those who fail to meet the settlement deadline risk potential lawsuits aiming to recover preferences received.

Despite the bankruptcy, Celsius has actively managed its assets, including unstaking and withdrawing Ethereum, to prepare for distributions to creditors.

Currently, the firm holds a substantial portion of the withdrawal queue, totaling 112,037 ETH, valued at approximately $266 million.

Crypto Communities Reacts to Celsius Latest Filing

Celsius’ recent decision has sparked discussions within the crypto community, with some viewing it as a crucial step for the platform’s financial recovery.

However, critics argue that it imposes an unfair burden on creditors who acted prudently prior to the company’s bankruptcy.

A customer expressed disagreement with Celsius’ 25% demand, recounting an experience of withdrawing $110k worth of LUNA during a decline. He faced a 24-hour delay in Celsius approving the withdrawal, receiving the coins when their value had significantly dropped.

Crypto enthusiast @ElevenPainG criticized the filing, drawing a parallel to his bank requesting him to return the money spent last year.

These controversies highlight the intricacies and risks in the cryptocurrency market, particularly during financial distress and bankruptcy.

Deep Dive Into Celsius Bankruptcy Progress

On July 13, 2022, Celsius filed for Chapter 11 bankruptcy proceedings, revealing a substantial debt of $1.2 billion, total liabilities amounting to $5.5 billion, and assets valued at $4.3 billion.

During a March 21, 2023 hearing at the US Bankruptcy Court for the Southern District of New York, a compromise was approved involving Celsius debtors, the unsecured creditor’s committee, and custodial account holders.

Under this agreement, Celsius Debtors are required to settle claims against Custody Account holders concerning the custody assets.

The terms specify a gradual repayment of 72.5% of Bitcoin (BTC) and Ether (ETH) holdings, excluding transaction fees. Interest-earning account holders will also receive a combination of cryptocurrency and shares in a new mining company formed from Celsius’s remaining assets.

On November 9, 2023, Celsius Network received court approval to transition into a Bitcoin mining company owned by its creditors.

This strategic move is aimed at compensating account holders who have faced restricted access to their funds for over a year.

Meanwhile, Celsius and its CEO, Alex Mashinsky, have been embroiled in legal issues, facing lawsuits from regulatory bodies, including the Securities and Exchange Commission (SEC), with Mashinsky specifically facing fraud charges.

Amid these legal challenges, Celsius undertook a significant strategic move by transferring over $90 million in unstaked Ethereum (ETH) to major creditors such as Coinbase and FalconX.

This liquidation effort is part of a broader strategy to increase liquidity for restructuring expenses and ensure timely payments to creditors.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.