The former crypto lending platform Celsius Network is asking for money back from all users who withdrew more than $100,000 in the 90 days leading up to the collapse on July 13, 2022.
According to what has emerged, the parties involved in this matter will have to pay 27.5% of the amount withdrawn by the beginning of this summer, or they will be sued and will have to appear in court.
Requesting money back from the same investors is a common practice within the world of US bankruptcy management, and it has been applied many times in the past to ensure that all customers who have been burned receive fair reimbursement.
Celsius, in order to comply with the repayment of its creditors, has also withdrawn a total of 206,300 ETH from staking, with a value of approximately 490 million dollars at current prices.
Let’s see all the details below.
Summary
Celsius asks for the return of funds from users who withdrew crypto within 90 days of the crash
The former crypto lending platform Celsius Network informed its creditors yesterday that some users who withdrew funds within 90 days of the platform’s collapse on July 13, 2022 will have to repay the capital.
According to a new document submitted to the Southern District of New York Supreme Court by the law firm Kirkland & Ellis, all account holders with more than $100,000 in the 90 days prior to the Celsius outbreak are subject to revocations.
Users who have withdrawn less than $100,000 will not have to repay the money, but they will still have to vote to accept the plan and not waive the releases provided by the plan.
They will have to make a payment equal to 27.5% of the amount withdrawn during the reference period by summer 2024 or give up this option and appear in court.
The reason for the multiple requests for compensation to the same investors is to offer fair and just compensation to all stakeholders who participated in Celsius’ bankruptcy crypto.
Regarding the news, here is what Alan R. Rosenberg, partner at the law firm Markowitz Ringel Trusty & Hartog, stated:
“This notice offers individuals who have a preferential exposure of over $100,000 – meaning they have withdrawn $100,000 or more within 90 days from the deposit date – to prepay 27.5% of the withdrawn amount with the Estate, without being sued. We still need to vote to accept the plan and not waive the releases.”
This twist in the Celsius saga takes us back in time, more precisely to December 2008, when it was discovered that the investment fund of the famous Bernie Madoff “Bernard Madoff Investment Securities” was just a Ponzi scheme.
At that moment, one of the giants of Wall Street definitively closes its doors after decades of returns above the US stock market benchmark, leaving the fund’s investors empty-handed.
During the investigations into the Madoff fund, investors who had withdrawn before the collapse in December 2008 were asked to return the amount, in a manner very similar to what is happening today with Celsius.
The problem with compensation claims in the Madoff case is that the ones who paid the highest price were several families who had spent the money earned from the fund over the years. Hundreds of investors had to put a mortgage on their homes, losing what they had saved through more than 20 years of sacrifices.
All this because the Securities and Exchange Commission, which should theoretically protect American investors from scams and market pitfalls, has not been able to perform its job excellently, having been scammed for over 64 billion dollars.
Celsius prepares to repay its creditors and releases 490 million dollars in ETH from staking
The crypto lending platform Celsius Network, in addition to reaching out to investors who withdrew before the crash, is liquidating its assets to meet the refund requests of its creditors, as part of the post-chapter 11 reorganization process.
All those who have lost money investing in Celsius in 2022 and have been waiting for about 18 months will soon see a portion of their investment returned (with refund percentages still unknown), which will be paid out directly in BTC or ETH.
The liquidation process of Celsius’ internal assets also affects the Ether put in staking on the 2.0 platform, where they had been previously locked.
Specifically, from January 5 onwards, a total of 206,300 ETH, worth approximately 490 million dollars at current prices have been withdrawn.
Regarding this massive unlock, the blockchain analysis company Nansen has clarified that in recent days almost a third of the ETH present in the pending withdrawal queue belonged to Celsius.
As clarified by the lawyers handling the bankruptcy, the withdrawn cryptocurrency will be used to “offset some costs incurred during the restructuring process” and “ensure timely distributions to creditors“.
Considering that the price of ETH in July 2022 was only $1070, and that in these last 18 months, in addition to the appreciation of the Celsius currency, it has achieved an average annual return of 4.2%, we can say that it was a good deal to lock them in Ethereum 2.0 and wait until now for the redeem.
Observing the withdrawal queues from Celsius, many users were scared thinking that the liquidation of the lender’s assets would cause a drop in the price of ETH, but so far it has not.
Others have suggested that this represents a positive move for ether’s long-term future.
User X “WazzCrypto” commented on the news:
“I don’t think you guys understand how much weight will be lifted off ETH when the Celsius vampires finally fade into oblivion and distribute what’s left.”
