Cryptocurrency lending company Celsius: Creditors who withdrew over $100,000 in the 90 days before bankruptcy must return some funds

The bankrupt cryptocurrency lending company Celsius Network announced yesterday, September 9, through legal documents, that it will be seeking partial repayment from creditors who withdrew more than $100,000 within 90 days prior to the company's bankruptcy. Failure to comply may result in legal action. Creditors who withdrew less than $100,000 are not required to repay, but will still need to vote to accept the proposed plan.

Celsius: Creditors Required to Repay Withdrawals Before Bankruptcy

According to a notice sent by Celsius to its creditors and filed with the Southern District of New York Bankruptcy Court on Tuesday, the company plans to propose a new plan to accelerate the repayment and bankruptcy reorganization process to its creditors.

The content stated that creditors of Celsius who withdrew more than $100,000 from the company in the three months leading up to the day of Celsius' bankruptcy announcement on July 13, 2022, will be required to repay a portion of the funds within a specified time frame, or face legal action:

Creditors who withdrew above the mentioned amount will be required to repay 27.5% of the amount withdrawn during that period, and only creditors who adhere to this plan will be eligible to participate in the distribution of assets in future reorganization plans.

The document also added that "users who withdrew less than $100,000 will not be required to repay, but they will still need to vote to accept the plan to protect their interests."

Review of Celsius' Bankruptcy Journey

Creditors Await Compensation

In July 2022, affected by the Terra/Luna black swan event and the 3AC bankruptcy, Celsius announced its application for bankruptcy protection that month, citing a funding gap of up to $1.2 billion on its balance sheet.

In September of the previous year, Celsius had obtained court approval to sell its assets to the Fahrenheit Alliance, composed of multiple institutions and investors, giving creditors hope of recovering 67% to 85.6% of their assets.

In November, Celsius proposed a plan to transform into a Bitcoin mining company owned by creditors, intending to distribute assets to creditors in the form of a debt-for-equity swap, which received preliminary approval from the bankruptcy court but still awaits approval from the U.S. Securities and Exchange Commission (SEC).

Will Celsius' approval to transform into a Bitcoin mining company make creditors new shareholders?

Recently, Celsius announced that it will distribute and repay eligible creditors proportionally through the unlocking of ETH held as collateral, with an estimated scale of $15 billion.

I don't think you guys understand how much weight will be lifted off $ETH when Celsius vampires finally fuck off into oblivion and redist what's left

Held more than $800M $ETH, were one of the biggest stakers and been consistently selling $20M/week on the market for months https://t.co/ypnzY2nOAg

— Wazz (@WazzCrypto) January 4, 2024

CEO Mashinsky Accused of Fraud

Meanwhile, as details from the bankruptcy hearings and subsequent news emerged, the community gradually discovered more undisclosed secrets within Celsius, including disorganized risk control mechanisms and the manipulation of the platform token $CEL.

Last year, Celsius and its founder and former CEO Alex Mashinsky were sued by multiple regulatory agencies, including the Federal Trade Commission (FTC), the Commodity Futures Trading Commission (CFTC), and the SEC, on charges of fraud, accusing them of misleading users.

Currently, Mashinsky's criminal trial is scheduled to begin in September this year, and Celsius has been fined $4.7 billion by the FTC.