Celsius liquidators seek fund return from large withdrawals

Lawyers handling Celsius’s bankruptcy have notified creditors that individuals who made big withdrawals in the 90 days leading up to the company’s bankruptcy declaration will be required to return a portion of those funds.

Specifically, account holders who withdrew over $100,000 during the 90 days before July 13, 2022, the date Celsius filed for bankruptcy, are subject to these clawbacks. These individuals will soon receive letters instructing them to repay 27.5% of the amount they withdrew during this period. Compliance with this request makes them eligible for future distributions under the reorganization plan.

Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog law firm, explained, “This notice is targeting those who have preference exposure above $100k, providing them an opportunity to settle with the Estate for 27.5% of their withdrawal amount without facing a lawsuit.” However, they must also vote to accept the reorganization plan and not opt out of the releases.

For users who withdrew less than $100,000, there is no requirement to return funds. Nevertheless, they are still required to participate in the voting process regarding the plan and must not opt out of the plan’s releases. Rosenberg warned, “Those who do not comply could potentially face legal action to recover the preferences they received.”

Celsius’s bankruptcy was declared amidst a $1.2 billion deficit on its balance sheet. In September 2023, creditors approved a reorganization plan. Under this plan, custodial account holders would receive 72.5% of their holdings in bitcoin and ether, while interest-earning account holders would get a mix of crypto and shares in a new mining company formed from Celsius’s remaining assets.

In November, following the bankruptcy proceedings, Celsius resumed withdrawals for eligible creditors. The company, along with its founder and CEO Alex Mashinsky, has faced legal challenges, including lawsuits from the SEC, FTC, and CFTC for allegedly misleading customers. Mashinsky has been charged with fraud, with his trial set for the following fall. Additionally, Celsius agreed to a $4.7 billion settlement with the FTC, to be paid after the conclusion of the bankruptcy proceedings.