Celsius Network files lawsuit targeting 1,300+ creditors who withdrew $100K+ before bankruptcy.
Former CEO Alex Mashinsky faces market manipulation charges amid Celsius Network’s financial crisis.
Clawback efforts aim to recover up to $2 billion from pre-bankruptcy withdrawals.
The defunct crypto lending platform, Celsius Network, has resurfaced with a new legal action targeting some of its creditors. The Celsius Network Litigation Administrator has filed a lawsuit in the United States Bankruptcy Court for the Southern District of New York.
The lawsuit focuses on a group of Celsius account holders allegedly receiving “preferential transfers.” This term refers to those who withdrew over $100,000 from the platform within 90 days before Celsius filed for bankruptcy. More than 1,300 individuals and entities, including investment funds and companies, are implicated in this case.
One affected user expressed frustration on social media, stating,
“Celsius Network has officially sued me and thousands of innocent users… because we happened to take our money off the platform 90 days before they declared bankruptcy.”
Celsius Network has officially sued me and thousands of innocent users in New York courts this week. Every single person & entity in crypto needs to be fighting alongside us against this bs. Because if we lose, it will affect every user of a cex.
The transactions occurred between April 14, 2022, and July 13, 2022, during which significant withdrawals affected the company’s financial stability.
Financial Impact and Clawback Provisions
The withdrawals during this period heavily impacted Celsius Network’s financial position, leading to its bankruptcy filing shortly after that. The company’s former CEO, Alex Mashinsky, resigned amidst the turmoil, and both he and other executives are currently facing charges related to allegations of market manipulation.
Celsius Network is seeking to recover funds through “clawback.” This legal provision allows bankrupt companies to reclaim funds users withdraw within a certain period before the bankruptcy filing. Celsius Network had initiated this effort earlier in the year, aiming to recover up to $2 billion.
The firm’s previous settlement offer recovered nearly $100 million and resolved over half a billion dollars in preferential transfers. This was achieved through a settlement agreement with more than 1,500 account holders.
Settlement Agreements and Potential Litigation
Celsius Network has put forward a settlement offer that includes an exclusively beneficial rate for those who agree to settle their claims. The drafting committee has also warned of potential litigation for those not returning the funds. This approach indicates the company’s determination to recover as much as possible to repay other users. The settlement offers, and the clawback efforts are part of Celsius Network’s broader strategy to address the financial shortfall caused by the mass withdrawals.
Celsius Network’s legal and financial troubles are compounded by the ongoing investigations into its former executives. Alex Mashinsky, the CEO at the time of the company’s collapse, and other executives are facing charges related to allegations of market manipulation. These charges add another layer of complexity to the company’s efforts to stabilize and rebuild.
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Martin Wilson has been following the crypto space since 2013. He is a passionate advocate for blockchain technology, and believes that it will have a profound impact on how people live their lives. In addition to being an avid blogger, Martin also enjoys writing about developments in the industry as well as providing useful guides to help those who are new to this exciting frontier of finance and technology.
