Surprisingly, bankrupt crypto lender Celsius Network customers are now facing legal action from bankruptcy managers after making substantial withdrawals within 90 days before the company’s bankruptcy declaration. 

The bankruptcy managers have demanded that affected customers return some of their funds or potentially face further legal consequences.

Customers Face Celsius Network’s Settlement Demands

The filing, published on Tuesday, revealed that customers who withdrew over $100,000 within the specified 90-day period before July 12, 2022, find themselves at the center of the legal dispute. 

These customers have been notified through an official filing outlining the procedures for settling their withdrawal preference exposure.

Withdrawal preference exposure noted in the notice refers to the aggregate value of assets withdrawn by customers from the Celsius Network platform during the specified period, minus any subsequent deposits made after the first withdrawal. 

The bankruptcy managers have determined that customers with withdrawal preference exposure greater than $100,000 must settle their claims or obtain a court order ruling to avoid potential liability.

The bankruptcy plan, known as the Modified Joint Chapter 11 Plan of Reorganization of Celsius Network LLC and Its Debtor Affiliates, offers an Account Holder Avoidance Action Settlement. 

Under this settlement, the Debtors will release avoidance actions against account holders meeting certain criteria, including accepting the plan on all claims and providing a payment equal to 27.5% of their withdrawal preference exposure.

The distribution agent is not obligated to make distributions to account holders with unresolved withdrawal preference exposure until their claims are settled, a court rules in their favor, or the withdrawal preference exposure is resolved with the litigation administrator after the plan’s effective date.

Settle Now Or Face Consequences

Celsius Network, in collaboration with the committee, has extended the payment deadline to allow affected customers to settle their withdrawal preference exposure and receive a release of all avoidance actions. The plan’s effective date is anticipated to occur around January 31, 2024.

Customers wishing to make the settlement payment must also submit the election form by January 25, 2024. The Debtors will start accepting completed election forms on January 17, 2024. Failure to submit the form may result in the rejection of the settlement payment.

It is important to note that failure to settle withdrawal preference exposure by January 31, 2024, may lead to further correspondence or actions by the litigation administrator after the plan’s effective date.

As customers grapple with the unexpected legal action, the crypto community awaits further developments in this ongoing bankruptcy case. 

The Account Holder Avoidance Action Settlement outcome will shed light on resolving withdrawal preference exposure claims and the subsequent distribution of funds.

Featured image from Shutterstock, chart from TradingView.com 

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In a recent announcement, bankrupt crypto lender Celsius has initiated additional withdrawals for certain eligible custody users. However, it’s important to note that only specific custody assets are currently available for withdrawal, while other cryptocurrencies such as Bitcoin (BTC) remain inaccessible. 

Starting November 29th, two groups, namely Class 6A General Custody Claims and Class 6B withdrawable custody claims, are eligible for withdrawals. Users within these groups have until February 28th to make their withdrawals. 

Qualifying users can withdraw 72.5% of their crypto, minus transaction fees, provided they did not participate in a previous custody settlement. 

Withdrawal Woes For Celsius Users

In the November 29 announcement, Celsius urged users to withdraw these assets from the Celsius app immediately and to keep personal records of relevant information, as the app will only be accessible for a limited time. 

However, despite the withdrawal option, some Celsius users have experienced difficulties, according to reports on the X platform. This development comes as some 58,300 users hold approximately $210 million worth of assets that have been deemed “custodial assets” by the court.

According to user responses to the Celsius announcement, there have been reports of login failures on the platform. Users claim to be experiencing errors even after attempting to reinstall the Celsius app. 

Additionally, some users have expressed concern that their Earn accounts are empty, further exacerbating the issues faced by former users of the crypto lending platform. One user specifically stated: 

While my frozen portfolio balance is visible, my custody balance shows 0.

Transition To ‘Creditor-Owned’ Bitcoin Mining Company

As reported by our sister website, Bitcoinist Celsius recently obtained approval from the bankruptcy court for its proposal to transition into a creditor-owned Bitcoin mining company. 

This plan involves repaying customers through a combination of crypto assets and stock in the newly established Bitcoin mining firm, which will be publicly listed.

The distribution of assets is expected to commence in early 2024, pending endorsement from the US Securities and Exchange Commission (SEC). However, Celsius acknowledges the possibility of liquidation if the crypto-mining proposal fails to materialize.

Celsius and its founder and CEO, Alex Mashinsky, have faced legal action from various entities, including the SEC, Federal Trade Commission (FTC), and the Commodity Futures Trading Commission (CFTC), for alleged misleading practices. 

Celsius promptly settled with the FTC, agreeing to pay $4.7 billion once the bankruptcy proceedings concluded. Mashinsky has been charged with fraud; his criminal trial is scheduled this year. 

Overall, the resolution of the reported issues faced by Celsius users remains uncertain, including the login difficulties and accounts displaying zero balances. 

It is yet to be determined whether these occurrences are temporary or persistent and how the platform intends to address them. The future actions and measures Celsius took to rectify these concerns are still to be clarified.

The lender’s native token, CEL, is trading at $0.2533, up 5% in the past 24 hours. However, it is important to note that the token has yet to recover from its 2022 decline and remains down more than 50% year-to-date.

Featured image from Shutterstock, chart from TradingView.com

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Celsius Network, a bankrupt digital asset lender, has revealed plans to begin repaying creditors using billions of dollars in crypto assets before the year’s end. 

The company presented a restructuring plan, outlined in a recent filing to a US bankruptcy court, which aims to generate funds for a new corporate spinoff known as “NewCo” and facilitate customer repayments.

Celsius Vows To Clear $2 Billion Debt

According to the filing, the plan outlines a distribution of at least $2.03 billion in cryptocurrency to creditors, with the actual amount subject to fluctuations in the cryptocurrency market. 

This distribution will occur as soon as reasonably practicable after the plan becomes effective, either through the NewCo transaction or an orderly wind down. The NewCo transaction, sponsored by the Fahrenheit Group, is a key component of the plan. 

It involves the creation of a new cryptocurrency company owned by customers, focusing on Bitcoin mining and staking. NewCo, which aims to maximize liquidity by listing on NASDAQ, will be managed by experienced crypto-native operators from Fahrenheit. 

The group has committed to injecting up to $50 million as an equity stake in NewCo, aligning the interests of Fahrenheit and creditors who will own shares in the new company.

In the event that the NewCo transaction cannot be completed, the plan includes an orderly wind-down option that would provide creditors with better recoveries compared to a Chapter 7 liquidation.

Celsius’s legal representative, Christopher S. Koenig, also revealed that the restructured company, expected to emerge from Chapter 11, will receive $450 million in capital and financial backing. 

However, the focus remains on the successful execution of the NewCo transaction, which would mark a significant milestone as the first revival of a failed crypto platform under Chapter 11, following the industry’s wave of insolvencies last year.

While the approval of Celsius’s plan is under deliberation by Judge Martin Glenn, some customers who have been unable to access their funds have expressed opposition. 

Additionally, an affiliate of Lantern Ventures owed approximately $82 million, has challenged the plan, claiming overvaluation of the new business by Celsius’s advisors. Clearance from securities regulators will also be necessary for the new venture.

It is important to note that if the new company were to fail, liquidation could become a possibility, potentially resulting in lower repayments for customers. 

Nonetheless, Celsius Network’s proposed plan represents a significant effort to repay creditors and potentially revitalize the company, providing hope for both the cryptocurrency industry and affected stakeholders.

At present, the native token of the company, CEL, is trading at $0.1535, reflecting a 1.1% decline over the past 24 hours. However, it is noteworthy that the token has experienced a notable upward trend in the last 30 days, exhibiting a substantial surge of over 21% during this period.

Featured image from Shutterstock, chart from TradingView.com

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