Customers of the bankrupt crypto lender Celsius Network are now in hot water as bankruptcy managers pursue legal action against those who made significant withdrawals within 90 days of the company’s bankruptcy declaration.
This action has left affected customers with the difficult choice of returning some of their funds or facing additional legal consequences.
A recent filing, made public on Tuesday, sheds light on the legal disputes involving customers who withdrew more than $100,000 within the 90 days before July 12, 2022.
These customers are now the subject of a legal dispute initiated by bankruptcy administrators, who have formally notified them of the procedures for resolving their withdrawal preference exposure.
Understanding Withdrawal Preference Exposure: As stated in the notice, withdrawal preference exposure refers to the total value of assets withdrawn by customers from the Celsius Network platform during the specified period.
This calculation does not take into account any subsequent deposits made after the initial withdrawal.
Customers with withdrawal preference exposures over $100,000 must take immediate action to settle their claims, according to bankruptcy managers. Failure to do so may expose customers to liability unless they obtain a court order ruling in their favor.
Celsius Network LLC and Its Debtor Affiliates’ Modified Joint Chapter 11 Plan of Reorganization introduces an Account Holder Avoidance Action Settlement.
This settlement provides a resolution for account holders who meet certain criteria, such as accepting the plan on all claims and receiving a payment equal to 27.5% of their withdrawal preference exposure.
After the plan’s effective date, the distribution agent is not required to make distributions to account holders who have unresolved withdrawal preference exposure until their claims are settled, a court rules in their favor, or the withdrawal preference exposure is resolved with the litigation administrator.
Celsius Network has extended the payment deadline in collaboration with the committee to accommodate affected customers in settling their withdrawal preference exposure. The plan’s implementation date is expected to be around January 31, 2024.
Customers who wish to make the settlement payment must complete and return the election form by January 25, 2024.
On January 17, 2024, the Debtors will begin accepting completed election forms. It is critical to note that failure to submit the form may result in the settlement payment being rejected.
Customers who do not settle their withdrawal preference exposure by January 31, 2024, may face additional correspondence or legal action from the litigation administrator after the plan’s effective date.
To avoid additional legal ramifications, affected customers should follow the procedures and deadlines outlined.
