Key Takeaways
- Under this filing, eligible account holders can settle their liabilities by remitting 27.5% of the funds by January 31, 2024.
- Non-compliant account holders may face lawsuits to recover the preferences they received.
Amidst the tumultuous world of cryptocurrency, the saga of Celsius, a once-prominent crypto lender, takes another intriguing turn as the company navigates its bankruptcy proceedings. Recent developments reveal that creditors who withdrew substantial sums from the platform prior to its declaration of bankruptcy may now find themselves entangled in legal proceedings.
Administrators overseeing Celsius’s bankruptcy filed a notice of intent, indicating that account holders who withdrew more than $100,000 within the 90 days leading up to the company’s bankruptcy declaration in July 2022 may be required to return a portion of those funds. The filing introduces the concept of “withdrawal preference exposure” and stipulates that eligible account holders can settle their liabilities by remitting 27.5% of the funds by January 31, 2024.
To facilitate this settlement, account holders must submit an election form by January 25, expressing their intent to make the required payment. Those who opt for this resolution will receive a release of all avoidance actions and become eligible for distributions under the company’s reorganization plan.
However, the stakes are high for those who opt not to settle by the deadline. The filing warns that administrators will address the withdrawal preference exposure through separate correspondence or legal action after January 31, 2024. Non-compliant account holders may face lawsuits to recover the preferences they received.
Celsius, which filed for bankruptcy in July 2022, has been undergoing a complex restructuring process. In March, the court approved a settlement plan, granting users with crypto in Celsius deposit accounts 72.5% of their funds in two payments throughout 2023. Subsequently, creditors greenlit a reorganization plan in September, allowing the distribution of approximately $2 billion worth of bitcoin and ether from the bankruptcy estate.
In a strategic pivot, Celsius’s equity was cleared to be transferred to NewCo, managed by the Fahrenheit consortium, which acquired the company in May. The consortium’s plans involve steering the new entity towards crypto mining and staking. This shift, approved by the court in November, reflects the company’s response to regulatory considerations and the imperative to address creditor claims.
The evolving narrative took another turn in November 2023 when eligible participants were granted access to withdraw some of their cryptocurrency holdings. Celsius further streamlined its post-bankruptcy strategy in November, narrowing its focus to Bitcoin mining. The move, greenlit by the presiding judge in December, marked a departure from the initial plan, which also included staking fees generated by validating blockchain transactions and managing its portfolio of cryptocurrency loans.
Earlier this year, the crypto lender has announced its plans to unstake its existing Ethereum holdings to meet its obligations to creditors. Notably, Nansen, a blockchain analytics firm, reported that a significant portion of Ethereum in the pending withdrawal queue, valued at $468.5 million at current prices, belongs to Celsius.
In the unfolding drama of Celsius’s financial repositioning, the company’s actions continue to be shaped by a dynamic interplay of regulatory dynamics, creditor demands, and strategic considerations in the ever-evolving crypto landscape.
