After Bankruptcy, Celsius Still Asked Users to Return Their Money

After bankruptcy, Celsius still asked users to return their money

According to an announcement dated January 9, accounts that have withdrawn more than $100,000 within 90 days before July 13, 2022 (the date Celsius announced bankruptcy) may have part of the money withdrawn. According to that announcement, Celsius required these accounts to refund 27.5% of the withdrawn amount.

The Celsius bankruptcy administrator notified creditors that account holders who withdrew more than $100,000 in the 90 days before July 13, 2022, the date Celsius declared bankruptcy, will have to return some of their funds or face legal action. Letters will be sent to relevant…

— Wu Blockchain (@WuBlockchain) January 10, 2024

If they comply, these people will have their funds reallocated in the future according to the company’s reorganization plan. If they don’t, they could face a garnishment lawsuit from Celsius, according to Alan R. Rosenberg, a partner at the law firm Markowitz Ringel Trusty & Hartog.

Those who withdrew less than $100,000 do not have to pay the money back, he added, but they still need to vote and opt out of applying for a refund under the realignment plan.

Celsius declared bankruptcy on July 13, 2022 when the crypto lending company lost $1.2 billion on its balance sheet. In September 2023, creditors approved a reorganization plan, according to which custodial account owners will receive 72.5% of their shares in BTC and ETH.

Last year, Celsius and its founder and CEO Alex Mashinsky were sued by the SEC, FTC, DOJ and CFTC for defrauding customers. Mashinsky alone is charged with fraud, his trial is expected to begin in September 2024. To date, Celsius has settled with the FTC with the approval of a $4.7 billion fine after the bankruptcy proceedings ended.

CEO Alex Mashinsky

The lending platform recently announced it would stop staking large amounts of ETH assets, which were intended to earn more money for debt repayment and were once observed to be worth more than $800 million. Now the company withdraws money to cover expenses, as well as prepare for distribution to creditors.

Immediately after the news that Celsius would unstake, 500,000 ETH (equivalent to 1 billion USD) from more than 15,000 validators are rushing to withdraw, signaling a sharp decline in Ethereum network staking assets.