Wednesday, 28 February 2024

Crypto News

Celsius initiates recovery of large pre-bankruptcy withdrawals

Embattled crypto lender Celsius wants to start repaying customers by year-end

  • Celsius Creditors withdrawing $100k+ pre-bankruptcy face legal action and must comply for future distributions.
  • Celsius’ post-bankruptcy Bitcoin mining focus approved; Ethereum unstaked for timely creditor repayments.
  • Legal challenges persist; CEO Alex Mashinsky faces fraud charges; $4.7B FTC settlement hinges on successful bankruptcy completion.

In a strategic move amidst its post-bankruptcy revival, Celsius, the crypto lending platform, has taken a bold step to recover from its financial turmoil. The company is now demanding a 27.5% return on substantial withdrawals made just before its bankruptcy filing.

This marks a crucial development in Celsius’ ongoing efforts to navigate regulatory challenges and fulfil its commitments under the reorganization plan. The lender recently said it would unstake $470M Ethereum in readiness for creditor repayments.

Celsius enforces 27.5% return of funds from creditors

Celsius recently issued notifications to creditors who withdrew over $100,000 within 90 days before the company declared bankruptcy on July 13, 2022. These account holders are now facing the requirement to return 27.5% of the funds they withdrew during that critical period.

Legal actions may be initiated against those who do not comply with this directive. Compliance, however, makes these creditors eligible for future distributions according to Celsius’ reorganization plan.

This stern approach underscores Celsius’ commitment to managing its financial crisis effectively. Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog law firm, explained that creditors falling under the “withdrawal preference exposure” category must make a choice – settle with the estate by paying 27.5% of the withdrawn amount or accept the reorganization plan without opting out of the releases.

Celsius’ bankruptcy journey and legal challenges

Celsius declared bankruptcy in July 2022, revealing a staggering $1.2 billion deficit in its balance sheet. Despite creditors approving a reorganization plan in September 2023, Celsius and its CEO, Alex Mashinsky, faced legal challenges from the SEC, FTC, and CFTC. Mashinsky, charged with fraud, awaits trial in the fall. Celsius agreed to a $4.7 billion settlement with the FTC, contingent upon completing its bankruptcy proceedings.

This latest notice to creditors is a crucial step in Celsius’ broader…

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