May 29, 2024
Crypto Lender Celsius Allows Select Users to Retrieve Funds Amid Legal Battles
Policy & Regulation

Crypto Lender Celsius Allows Select Users to Retrieve Funds Amid Legal Battles

In a significant development amid financial instability and legal hurdles, the embattled cryptocurrency lending platform Celsius has initiated withdrawals for specific users, according to a filing in the United States Bankruptcy Court for the Southern District of New York.

As outlined in the court document, participants falling under “Class 6A General Custody Claims” and “Class 6B Withdrawable Custody Claims” are now eligible for fund withdrawals. The deadline for these withdrawals has been set for Feb. 28, 2024.

Eligible participants are permitted to withdraw 72.5% of their cryptocurrency holdings, with the deduction of transaction fees. Notably, customers who opposed the reorganization plan have been excluded. Instead, a litigation administrator will independently manage their assets for a six-month duration.

The filing comes as Celsius continues navigating through a complex legal landscape after filing for bankruptcy in July 2022. In March, a settlement plan was endorsed, promising to deposit account holders 72.5% of their funds in two instalments throughout 2023.

Subsequent updates saw creditors approving the company’s reorganization plan in September, paving the way for the distribution of approximately $2 billion in Bitcoin and Ether. The company’s equity will be transferred to NewCo, overseen by the Fahrenheit consortium. Notably, in a recent announcement on Nov. 20, Celsius revealed that the core business of the proposed NewCo under its restructuring plan would shift from staking to Bitcoin mining.

Throughout the bankruptcy proceedings, Celsius has grappled with legal challenges from various regulatory entities, including the U.S. Securities and Exchange Commission, the Federal Trade Commission (FTC), and the Commodity Futures Trading Commission. All three agencies filed lawsuits against the company and its CEO, Alex Mashinsky, primarily centred on accusations of customer deception.

Despite reaching a substantial settlement of $4.7 billion with the FTC, Celsius and its CEO are not out of the legal woods yet. Alex Mashinsky is slated to face a criminal trial in connection with the allegations. As the platform takes steps towards financial recovery and a revised business model, the cryptocurrency community watches closely, aware of the broader implications for the industry.

This development underscores cryptocurrency platforms’ challenges, emphasizing the importance of regulatory compliance and robust financial management in an ever-evolving and scrutinized industry.


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