Celsius Network initiates legal action to recover funds from pre-bankruptcy withdrawals
Bankrupt crypto lender Celsius Network’s litigation administrator has initiated legal action against account holders who have not settled liabilities related to preferential transfers made in the 90 days before the firm filed for bankruptcy.
The lawsuits, filed in the US Bankruptcy Court for the Southern District of New York, target those with more than $100,000 in Withdrawal Preference Exposure (WPE).
The move follows a successful settlement with over 1,500 account holders, resulting in the recovery of nearly $100 million. The settlements addressed more than $500 million dollars in preference liabilities, providing significant relief to eligible Celsius creditors.
Celsius Litigation Administrator Mohsin Meghji said:
“Account holders who withdrew funds just before Celsius’ bankruptcy have benefitted unfairly, impacting other account holders. These individuals had ample opportunity to settle at favorable rates. Now, we will pursue the full value of cryptocurrency transferred during the preference period as stipulated by the Bankruptcy Code.”
Substantial withdrawals during the preference period, from April 14, 2022, to July 13, 2022, contributed to a significant financial imbalance at the firm, which eventually filed for bankruptcy following the preference period.
Former Celsius CEO Alex Mashinsky and other executives are facing charges of fraud and market manipulation, which contributed to the company’s downfall. The company emerged from bankruptcy earlier this year after implementing a reorganization plan approved by creditors.
The plan aims to return up to 85% of holdings to creditors. The recovered funds from the ongoing litigation are intended to benefit the creditors in line with the Celsius reorganization plan.
The reorganization plan also includes provisions for creditors with funds in Celsius’ interest-bearing Earn program, allowing them to receive a portion of their assets in crypto and shares of the new company.
The aggressive legal action highlights Celsius’ commitment to ensuring equitable treatment of all account holders and the integrity of the reorganization process.
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