Source: Adobe / FellowNeko

The bankrupt crypto lender Celsius Network has notified its creditors that customers who made substantial withdrawals in the 90 days leading up to the bankruptcy declaration may need to return a portion of the funds or face legal consequences.

According to a notice published by Celsius bankruptcy managers on January 9, account holders who withdrew over $100,000 in the 90 days prior to July 13, 2022 (the date Celsius filed for bankruptcy), are subject to clawbacks.

Forthcoming letters to the affected account holders will instruct recipients to make a payment equivalent to 27.5% of the amount withdrawn during the specified period. Compliance with this request will render them eligible for future distributions under the reorganization plan.

According to a report from The Block, Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog law firm, said the notice is directed at individuals with preference exposure exceeding $100,000, allowing them to “preemptively settle with the estate.”

Users who, in the months prior to the bankruptcy, withdrew less than $100,000 are not required to return the funds, but they still need to vote in favor of the plan and refrain from opting out of the releases outlined in the plan, Rosenberg further said.

Rosenberg highlighted that failure to comply with these instructions could lead to potential lawsuits against non-compliant individuals.

Celsius’ bankruptcy filing

Celsius Network filed for Chapter 11 bankruptcy following the collapse of the Terra blockchain ecosystem in mid-2022.

The compa noted at the time that it had anywhere between $1 billion and $10 billion in assets and liabilities and more than 100,000 creditors. Customer accounts on the platform had been frozen for about a month by the time the firm filed for bankruptcy.

Alex Mashinsky, Celsius Network’s former CEO, resigned from his position in June 2023.

The former CEO was arrested in July the same year but remained free on a $40 million bail.

Mashinsky is set to face a criminal trial beginning on September 17, 2024.

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