Celsius attempts to recover funds withdrawn by creditors in pre-bankruptcy period

Creditors who withdrew more than $100,000 from Celsius within three months prior to its bankruptcy will have to return part of those funds or risk legal action, as per a recent creditor notice.

Bankruptcy administrators for Celsius announced on Jan. 9 a plan to inform creditors that those who withdrew over $100,000 in the 90 days leading up to the bankruptcy announcement on July 13, 2022 could be obligated to return these funds.

The filing indicates that account holders with withdrawal amounts exceeding $100,000 who did not oppose the reorganization plan and who did not waive their rights can resolve their liability by repaying 27.5% of the withdrawn funds by Jan. 31, 2024.

To participate in this settlement, account holders must submit their intent through an election form by Jan. 25, 2024. Those who comply with the settlement will be exempt from further legal challenges and will benefit from the distributions outlined in the reorganization plan.

Account holders failing to meet the settlement deadline will face actions from the administrators, potentially leading to lawsuits to reclaim the funds.

Celsius went into bankruptcy on July 13, 2022, due to a $1.2 billion shortfall. In September 2023, creditors accepted a reorganization proposal, offering custodial account holders 72.5% of their Bitcoin (BTC) and Ether (ETH) holdings. Interest-earning account holders were to receive a mix of crypto and shares in a new mining company formed from Celsius’s remaining assets.

In November, Celsius successfully exited bankruptcy and enabled withdrawals for qualified creditors.

The company and its CEO, Alex Mashinsky, were sued by the SEC, FTC, and CFTC for customer deception, with Mashinsky facing fraud charges. His trial is set for autumn 2024.

Celsius agreed to a $4.7 billion settlement with the FTC to be paid post-bankruptcy.

Meanwhile, over the past week, Celsius transferred over $90 million in unstaked ETH to its major creditors, Coinbase and FalconX.

The move is part of a wider strategic effort to liquidate a significant portion of its Ethereum assets, aiming to enhance liquidity for restructuring costs and ensuring timely creditor payments.