Celsius Demands Return of Funds from Major Withdrawals
Bankrupt crypto lender Celsius has taken action against customers who made significant withdrawals in the months leading up to its bankruptcy. The lender is demanding that these customers return their funds or face potential legal consequences. A committee-supervised administrator has sent letters to customers who withdrew over $100,000 each between April 14 and July 13, 2022. The total amount withdrawn during this period exceeded $2 billion before Celsius declared bankruptcy in July 2022. The recovered assets will be used to repay creditors who did not withdraw funds from Celsius.
Celsius Aims to Rectify “Unfair” Withdrawals
According to a letter shared by a recipient on X, Celsius argues that customers who made large withdrawals “have unfairly benefited at other account holders’ expense.” These withdrawals were initiated by less than 2% of Celsius’ users but accounted for nearly 40% of the platform’s assets. In an effort to address this imbalance, Celsius is pursuing the return of the $2 billion withdrawn through a legal strategy known as the clawback provision.
The clawback provision is a bankruptcy law provision that ensures equitable redistribution of assets among creditors when a company becomes insolvent. It prevents preferential treatment and maintains the integrity of the bankruptcy process. Although reclaiming funds from parties who did nothing wrong may seem harsh, it ensures fair treatment for all creditors and equal distribution of available assets.
“Favorable Rate” Offered to Customers
The administrator’s letter offers customers a “favorable rate” if they agree to settle and return the funds. Those who decline the settlement offer may face larger sums to repay through potential legal proceedings. In January, Celsius informed creditors that customers who made significant withdrawals before the bankruptcy might be asked to return some of their funds or potentially face legal action. However, customers who withdrew less than $100,000 during this period are not obligated to return their funds.
Hot Take: Celsius Pursues $2B Pre-Bankruptcy Exodus
Celsius, the bankrupt crypto lender, has initiated efforts to recover funds from customers who made substantial withdrawals prior to the company’s bankruptcy. By demanding the return of these funds, Celsius aims to rectify what it considers an unfair advantage gained by a small percentage of users at the expense of others. The recovered assets will be used to repay creditors who did not withdraw funds from Celsius. Customers have been offered a “favorable rate” for settlement, but those who decline may face potential legal action and larger sums to repay. This move aligns with the clawback provision in bankruptcy law, which ensures equitable distribution of assets among creditors.
Sources:
Bloomberg,
Crypto News
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