Celsius seeks $2 billion from pre-bankruptcy withdrawals

Advisors overseeing Celsius Network’s bankruptcy are demanding that customers who withdrew over $100,000 in the 90 days before bankruptcy return those funds. According to a report published today by Bloomberg, these withdrawals totaled over $2 billion.

The Celsius committee said that the reason for clawback is to prevent those who withdrew funds early from having an unfair advantage over creditors who didn’t withdraw. As noted, the clawback effort targets approximately 2% of Celsius users but accounts for 40% of the platform’s assets withdrawn at the time.

Under the US Bankruptcy Code, companies are allowed to recover funds paid out just before filing to ensure fair treatment of all creditors. This prevents unfair prepetition payments to one creditor at the expense of all other creditors. In other words, those who didn’t withdraw funds shouldn’t be disadvantaged compared to those who did right before the collapse.

Celsius offers customers a “favorable rate” settlement to avoid potential litigation. This settlement considers the value of withdrawn assets at the time of withdrawal, allowing customers to keep any gains from recent price increases. On the other hand, customers who refuse the settlement risk being forced to return a potentially larger sum through lawsuits.

Crypto lender Celsius found itself in the hot seat during the summer of 2022 when it abruptly suspended all account withdrawals, swaps, and transfers between accounts, citing “extreme market conditions.” Just a month later, the company filed for Chapter 11 bankruptcy.

After a period of crisis, Celsius recently announced its successful reorganization and exited from bankruptcy proceedings. The company worked closely with the Official Committee of Unsecured Creditors (UCC) and federal and state regulatory agencies to facilitate the distribution of over $3 billion to its creditors.