Celsius bankruptcy administrators have informed creditors who made significant withdrawals within 90 days of the company’s bankruptcy declaration that they must return a portion of the funds or face potential legal action. According to the notice published on Tuesday, account holders who withdrew over $100,000 between April 14, 2022, and July 13, 2022, are subject to clawbacks.
Affected account holders will soon receive letters instructing them to repay 27.5% of the amount they withdrew during the specified period. Compliance with this request will make them eligible for future distributions under the reorganization plan.
Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog law firm, explained that this notice provides an opportunity for those who withdrew $100,000 or more within 90 days of the filing date to settle with the Estate and avoid potential lawsuits. However, they still need to vote in favor of the plan and not opt out of the releases.
On the other hand, users who withdrew less than $100,000 are not required to return the money, but they still need to vote in favor of the plan and not opt out of the releases.
Failure to comply with these requirements could result in legal action to recover the preferential treatment received by non-compliant individuals.
Celsius declared bankruptcy on July 13, 2022, due to a $1.2 billion deficit in its balance sheet. In September 2023, creditors approved a reorganization plan that entailed custodial account holders receiving 72.5% of their crypto holdings, while interest-earning account holders would receive a combination of crypto and shares in a new mining company formed from Celsius’ remaining assets.
In November, Celsius emerged from bankruptcy and allowed eligible creditors to make withdrawals.
Celsius and its founder and CEO, Alex Mashinsky, were previously sued by the SEC, FTC, and CFTC for misleading customers, and Mashinsky faced fraud charges. His trial is scheduled to commence next autumn. Celsius settled with the FTC, agreeing to pay $4.7 billion after concluding the bankruptcy proceedings.