April 19, 2024
Latest Cryptocurrency News

Celsius Seeks $2 Billion Clawback from Customers

Celsius, the defunct crypto lending company, is on a drive to recoup $2 billion from key customers who made significant withdrawals just before its bankruptcy in July 2022.

According to a recent Bloomberg report on March 20, a Celsius bankruptcy oversight committee has begun contacting clients who withdrew more than $100,000 before the platform’s demise. The goal is to use the potential returned funds to repay consumers who did not withdraw in time. This clawback effort is anticipated to affect approximately 2% of Celsius customers, who collectively withdrew a staggering 40% of the firm’s assets shortly before its bankruptcy filing.

Settlement Offers and Adjustments

The committee is extending a settlement offer to the affected customers, providing them with a “favorable rate” to settle their obligations. Those who opt for settlement will have their notional digital assets adjusted based on their valuation in July 2022, during the depths of the crypto bear market. This adjustment will allow them to retain any capital appreciation resulting from the subsequent market recovery.

Post-Bankruptcy Challenges and Legal Hurdles

While Celsius emerged from bankruptcy on Jan. 31, initiating the redistribution of over $3 billion in crypto and fiat money to users, challenges persist. Despite the agreement of 98% of creditors, some business creditors have raised concerns over the reduction of their claims by 30% due to fiat money payouts, compared to being compensated in crypto.

Furthermore, the firm grappled with legal battles, including a $4.7 billion settlement with the United States Federal Trade Commission, alongside agreements with the Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. Former CEO Alex Mashinsky’s resignation in September 2022 preceded his indictment on multiple felony counts in July 2023, including securities fraud and wire fraud related to his activities at Celsius. Mashinsky is currently free on a $40 million bail pending further legal proceedings.

Image by jcomp on Freepik

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