Celsius, the platform whose bankruptcy plan was finally approved late last year, has recently lashed out at former clients who cashed out before the company had the opportunity to freeze their funds.
The former crypto staking, lending, and exchange platform that has since shifted its focus to Bitcoin mining following the approval of the judge in its bankruptcy case was the first major player in crypto to bring up the “unsecured creditors” argument in court as a way to appropriate client funds.
Therefore, it’s not surprising that another outrageous proposal regarding bankruptcy should also come from Celsius.
According to a notice submitted by Kirkland & Ellis on behalf of their client, Celsius users who withdrew more than $100,000 from the platform in the 90 days prior to the former behemoth’s bankruptcy declaration must “resolve their outstanding liability” or face litigation.
K&E lawyers have labeled the act of withdrawing funds prior to bankruptcy “avoidance actions,” which can be pursued in court. According to the document, these creditors must return 27.5% of what they withdrew by the 31st of January or face clawbacks.
“If you are an Account Holder who did not accept the Custody Settlement or you do not have a Class 6A General Custody Claim, this is the amount you must pay to settle your total Withdrawal Preference Exposure. This amount is 27.5% of your total Withdrawal Preference Exposure. (…) I intend to make the WPE Settlement Payment by the deadline of January 31, 2024. I understand that I must make the WPE Settlement in Cash by wire.”
Payouts to Creditors Will Start Soon
The notice published by Celsius’ legal team is part of the preparations to repay creditors in accordance with the terms laid out in the restructuring agreement. Ostensibly, these measures will allow those who withdrew a significant amount but still had some assets trapped on the platform to receive some of the funds due to be distributed.
“After you submit the Election Form and make the WPE Settlement Payment, you will receive confirmation of the Debtors’ receipt of your WPE Settlement Payment, that you have completed all actions required under the Account Holder Avoidance Action Settlement, and that you will have been released from all the Avoidance Actions.”
Although clawback attempts have been made with varying degrees of success by FTX and others, the initiative to recoup funds from private investors is unprecedented and may be hotly contested in court. It’s worth noting that the paragraph above is contingent on the recipient of the notice signing their agreement to the term, and the enforceability of the clawback may be impossible.
However, if the move is successful, other bankrupt platforms will almost certainly take heed and file their own motions.
Binance Free $100 (Exclusive): Use this link to register and receive $100 free and 10% off fees on Binance Futures first month (terms).