Celsius Network initiates legal action to reclaim funds from pre-bankruptcy withdrawals

The administrator of bankrupt crypto lender Celsius Network has initiated legal action against account holders who failed to settle their liabilities related to preferred transfers in the 90 days prior to the company’s bankruptcy filing.

The lawsuits, filed in the U.S. Bankruptcy Court for the Southern District of New York, target individuals with Withdrawal Preference Exposure (WPE) exceeding $100,000.

The move followed a successful settlement with over 1,500 account holders resulting in the recovery of nearly $100 million. The settlements affected over $500 million in preferred debt and provided significant relief to eligible Celsius creditors.

Celsius litigation manager Mohsin Meghji said:

“Account holders who withdrew funds shortly before Celsius’ bankruptcy benefited unfairly, impacting other account holders. These individuals had ample opportunity to settle on favorable terms. Now we will claim the full value of the cryptocurrency transferred during the preferential period, as provided for under the bankruptcy law.”

Substantial withdrawals during the preferential period from April 14, 2022 to July 13, 2022 contributed to a significant financial imbalance of the company, which eventually filed for bankruptcy after the preferential period.

Former Celsius CEO Alex Mashinsky and other executives are accused of fraud and market manipulation that contributed to the demise of the company, which emerged from bankruptcy earlier this year after implementing a reorganization plan approved by creditors.

The plan envisages returning up to 85% of the shares to creditors. The funds recovered from the ongoing legal proceedings are to benefit creditors in line with the Celsius restructuring 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 cryptocurrencies and shares of the new company.

The aggressive lawsuit underscores Celsius’ commitment to fair treatment of all account holders and the integrity of the reorganization process.

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