- The lender is suing clients who withdrew over $100,000 before July 12, 2022
- Celsius demands account holders pay back 27.5% of the amount they withdrew
Customers of bankrupt crypto lender Celsius Network are being sued for making substantial withdrawals before the company declared insolvency, News BTC reported. Affected customers must return some of the funds or face further legal action.
According to Celsius’ court filing, published on Tuesday, former clients who withdrew over $100,000 three or fewer months before July 12, 2022, the date when the lender filed for bankruptcy, are at the epicenter of what promises to be an epic legal battle.
Clients have been notified of the action through an official filing. The filing refers to the amount of the assets customers withdrew from the Celsius Network platform less any subsequent deposits made after the first withdrawal.
Lender to claw back 27.5% of withdrawals
Celsius’ bankruptcy plan entails a so-called Account Holder Avoidance Action Settlement, under which the platform demands account holders pay back 27.5% of the amount they withdrew.
Celsius does not have to approve their withdrawals unless the claims are settled, there is a court verdict in their favor, or they resolve the withdrawal preference exposure after the plan’s effective date.
Customers’ recourse: Settlement or court order
Clients who withdrew more than $100,000 must either try to reach a settlement or obtain a court order to avoid potential liability. Celsius extended the payment deadline for customers to reach a settlement and become exempt of avoidance actions. The deadline is relatively near: January 31, 2024.
Those who want to make a settlement payment are required to file the corresponding form by January 25. Users who do not apply for a settlement by January 31 face further legal action after that date.
Community awaits further development
The outcome of the Avoidance Action Settlement will determine the resolution of the withdrawal preference exposure claims and fund distribution thereafter. The crypto community awaits development of this turn of events, which isn’t very surprising considering a judge ruled Celsius had to return $50 million to customers in August 2022.
Alex Mashinsky, the lender’s founder and ex-CEO, was accused of civil fraud by New York Attorney General Letitia James a year later.
