Creditors Required to Return Funds or Face Legal Action
Creditors who withdrew more than $100,000 from Celsius within three months prior to its bankruptcy are being notified that they may have to return part of those funds or risk legal consequences, according to a recent creditor notice.
Settlement Offer for Account Holders
The bankruptcy administrators for Celsius have announced a plan to inform creditors that account holders who withdrew over $100,000 in the 90 days leading up to the bankruptcy announcement could be required to repay 27.5% of the withdrawn funds by January 31, 2024. To participate in this settlement, account holders must submit their intent through an election form by January 25, 2024.
Consequences for Non-Compliance
Account holders failing to meet the settlement deadline will face actions from the administrators, potentially resulting in lawsuits to recover the funds.
Celsius’s Bankruptcy and Reorganization Plan
Celsius filed for bankruptcy on July 13, 2022, due to a $1.2 billion shortfall. In September 2023, creditors accepted a reorganization proposal that offered custodial account holders 72.5% of their Bitcoin (BTC) and Ether (ETH) holdings. Interest-earning account holders were set to receive a mix of crypto and shares in a new mining company formed from Celsius’s remaining assets.
Ongoing Legal Challenges and Settlement Agreement
The SEC, FTC, and CFTC have filed lawsuits against Celsius and its CEO, Alex Mashinsky, for customer deception, with Mashinsky facing fraud charges. A trial is scheduled for autumn 2024. Celsius has agreed to a post-bankruptcy settlement of $4.7 billion with the FTC.
Liquidation of Ethereum Assets
As part of its strategic efforts to enhance liquidity for restructuring costs and ensure timely creditor payments, Celsius has transferred over $90 million in unstaked ETH to major creditors Coinbase and FalconX.
Hot Take: Celsius’s Creditor Notice Raises Concerns
A recent creditor notice from Celsius has put creditors on alert, stating that those who withdrew large sums of money prior to the company’s bankruptcy may have to return a portion of those funds or face legal action. This development highlights the challenges faced by creditors and the ongoing repercussions of Celsius’s financial troubles. It remains to be seen how account holders will respond to the settlement offer and what impact it will have on their overall financial situation. As Celsius continues to navigate its post-bankruptcy phase, creditors and industry observers are closely monitoring the outcomes of ongoing legal battles and the company’s efforts to liquidate assets.
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