Key Takeaways
- The clawback is set to impact 2% of Celsius customers who, just before its bankruptcy filing, collectively withdrew 40% of the firm’s assets.
- A committee-appointed administrator is now contacting customers who withdrew over $100,000 before Celsius’s July 2022 bankruptcy.
In a bid to address financial turbulence, Celsius Network, the crypto lender, is embarking on a mission to reclaim over $2 billion withdrawn by significant customers in the lead-up to its bankruptcy declaration in July 2022.
The objective is twofold: to mitigate potential legal confrontations and ensure equitable distribution of remaining assets among creditors. Specifically targeting accounts that withdrew more than $100,000 during the critical period preceding the bankruptcy filing, the effort aims to replenish funds available for repaying the creditors left in the lurch.
The withdrawals have stirred concerns due to their preferential nature, benefiting a select few at the expense of the broader Celsius customer base. The committee is prepared to directly engage with these customers, extending an opportunity to settle at a “favorable rate” to sidestep potential litigation.
A Litigation Administrator appointed by Celsius will focus on a select group of customers collectively withdrawing over $2 billion from the platform during the 90 days leading up to its bankruptcy filing—a period now dubbed the Preference Period.
Approximately 2% of Celsius users, responsible for withdrawing roughly 40% of the platform’s assets within the 90 days preceding the bankruptcy declaration, will be impacted by this move.
Celsius’ bankruptcy filings reveal the firm held approximately $6 billion in assets before its collapse, boasting a user base of 1.7 million registered and 300,000 active users, each with account balances exceeding $100.
The legal framework of bankruptcy law empowers entities like Celsius to reclaim funds dispensed just before filing for bankruptcy, regardless of recipients’ innocence. This provision aims to ensure equitable treatment for all creditors, preventing premature fund withdrawers from gaining undue advantage.
The committee will extend a “favorable rate” to affected customers for settlement, coupled with the threat of litigation if funds remain unrecovered. Additionally, settling customers will have their digital assets adjusted based on their value in July 2022, near the nadir of the crypto bear market, allowing them to retain any capital appreciation from subsequent market recovery.
Following its exit from bankruptcy on Jan. 31, Celsius commenced the redistribution of over $3 billion in crypto and fiat money to users, endorsed by 98% of creditors.
