In an unexpected turn of events, former clients of the now-insolvent cryptocurrency lending firm, Celsius Network, are finding themselves caught in a legal tangle instigated by the company’s bankruptcy handlers. These managers are demanding that a subset of customers, who liquidated hefty sums from their accounts just before the company declared bankruptcy, return a portion of their funds or brace themselves for legal repercussions.
A legal document, issued on a recent Tuesday, has brought to light the plight of users who made withdrawals exceeding $100,000 in the 90-day lead-up to July 12, 2022. These users received communication detailing the protocols they must follow to resolve claims related to their “withdrawal preference exposure.”
The term “withdrawal preference exposure” pertains to the net value of assets customers pulled from the Celsius Network in that crucial 90-day window, accounting for any deposits made subsequent to the initial withdrawal. Established by the bankruptcy managers, these customers must either reach a settlement or procure a court ruling in their favor to negate prospective legal liabilities.
The bankruptcy scheme, coined as the Modified Joint Chapter 11 Plan of Reorganization for Celsius Network LLC and its affiliated debtors, proposes a settlement opportunity for account holders. This Account Holder Avoidance Action Settlement stipulates that debtors will forego avoidance actions provided the account holders comply with specific conditions, including the acceptance of settlement terms against all claims and a remittance of 27.5% of their withdrawal preference exposure.
Distributions to account holders grappling with unresolved withdrawal preference exposure are on hold until either a settlement is brokered, a court delivers a verdict in their favor, or the exposure claim is settled with the litigation administrator post-effectuation of the reorganization plan.
Account holders engaged with Celsius Network and the adjacent committee have been granted an extension to settle their withdrawal exposure preferences and, in doing so, assure a waiver of all impending avoidance actions. The indicated deadline for this process is positioned around January 31, 2024.
For those intent on settling, the necessary election form must be submitted by January 25, 2024, with the acceptance period for these forms beginning a week earlier on January 17, 2024. A missed deadline could lead to the forfeiture of the opportunity to settle.
It’s critical to understand that any unsettled withdrawal preference exposure by the January 31, 2024 deadline may draw further outreach or legal actions from the litigation administrator following the plan’s activation date.
Amidst this unforeseen legal entanglement, stakeholders in the cryptocurrency sector are keenly observing the scenario’s unfolding, with the outcomes of the Account Holder Avoidance Action Settlement likely to cast light on the adjudication of withdrawal exposure claims and the subsequent financial dispensation among claimants.
