Bankrupt crypto lender Celsius Network is seeking the return of over $2 billion withdrawn by major customers shortly before its bankruptcy declaration in July 2022, according to a release shared with CryptoSlate.
The initiative, led by a committee appointed during the company’s Chapter 11 proceedings, is part of the firm’s restructuring efforts and targets individuals who extracted large sums from the crypto platform to mitigate potential legal confrontations and ensure the remaining assets are distributed fairly among creditors.
Favorable rate
The efforts are specifically aimed at accounts that withdrew more than $100,000 during the critical period leading up to the company’s bankruptcy filing. Such a collective action intends to replenish the funds available to repay the creditors left behind.
The withdrawals have raised concerns due to their preferential nature, as they benefited a small percentage of users at the cost of the wider Celsius customer base.
The committee said it is prepared to contact these customers directly, offering them an opportunity to settle at a “favorable rate” to avoid potential litigation.
A Litigation Administrator appointed by Celsius will focus on a select group of customers who collectively withdrew more than $2 billion from the platform during the 90 days leading up to its bankruptcy filing, a period now referred to as the Preference Period.
2% of accounts
This move is set to impact only about 2% of Celsius users, who are responsible for withdrawing approximately 40% of the platform’s assets within the 90 days preceding the bankruptcy declaration.
Celsius bankruptcy filings show the firm held around $6 billion in assets before its collapse — with a user base comprising 1.7 million registered and 300,000 active users, each with account balances exceeding $100.
The legal framework of bankruptcy law enables entities like Celsius to reclaim funds dispensed just before filing for bankruptcy, irrespective of the recipients’ innocence. This provision aims to ensure fair treatment for all creditors, preventing those who withdrew funds prematurely from gaining an advantage over those who did not.
Cam Crews, a member of the Litigation Oversight Committee (LOC), an independent committee the Bankruptcy Court approved to oversee the Litigation Administrator’s efforts and other related activities, emphasized the settlement offer’s intention.
Crews said:
“This offer aims to correct the imbalances caused in the days before our bankruptcy filing. It presents an opportunity for those who disproportionately benefited to contribute to the relief of the creditors who were most affected.”
The settlement strategy aims to simplify the recovery process and offers a practical alternative to the potential complexities of litigation. Account holders who opt for the settlement can return a part of the assets they withdrew, which have since increased in value, rather than the original amount.
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