- Celsius is seeking to claw back $2 billion from major customers who withdrew funds shortly before its bankruptcy filing in July 2022 in order to repay other customers.
- The clawback is targeting the 2% of Celsius customers who withdrew 40% of the firm’s assets right before bankruptcy. Customers are offered favorable settlement terms.
- Celsius began redistributing over $3 billion to users in January 2023 as part of its bankruptcy exit plan, but some creditors complained about reduced fiat payouts.
Celsius, the bankrupt crypto lending platform, is seeking to claw back $2 billion from major customers who withdrew funds shortly before its bankruptcy filing in July 2022. This move aims to use the returned funds as an equity remedy to repay other customers who were not able to withdraw their assets before Celsius collapsed.
Background on Celsius Bankruptcy
In July 2022, Celsius filed for bankruptcy after halting withdrawals on its platform amidst massive liquidity issues. This left many customers unable to access their deposited crypto funds on Celsius.
According to a March 20 Bloomberg report, a Celsius bankruptcy oversight committee has started contacting customers who withdrew over $100,000 prior to Celsius’s collapse. The goal is to use potential returned funds to compensate customers who did not withdraw in time.
Clawback Details
The clawback is expected to impact around 2% of Celsius customers, who together withdrew 40% of the firm’s assets right before its bankruptcy.
The committee will offer a favorable rate to affected customers if they agree to settle. However, those who do not return funds face potential litigation. In addition, settling customers will have their assets valued at July 2022 prices, allowing them to benefit from the crypto market recovery.
On January 31, Celsius began redistributing over $3 billion to users as part of its bankruptcy exit plan approved by 98% of creditors. However, some creditors have complained their fiat payouts reduce claims versus crypto.
Celsius Fallout
In September 2022, Celsius CEO Alex Mashinsky resigned amidst the fallout. In July 2023, Mashinsky was indicted on fraud charges related to his Celsius activities.
The firm also settled $47 billion in fines with various government agencies including the FTC, DOJ, SEC and CFTC.
