The litigation administrator for bankrupt crypto lender Celsius is suing thousands of creditors who withdrew funds from the platform before it froze withdrawals and declared bankruptcy.
On July 1, Celsius’ litigation administrator filed complaints in the U.S. Bankruptcy Court for the Southern District of New York against account holders with more than $100,000 of “Withdrawal Preference Exposure,” or transfers made out of Celsius 90 days prior to its Chapter 11 bankruptcy filing.
According to Mohsin Meghji, the Celsius litigation administrator, account holders who withdrew their funds in the days leading up to the bankruptcy “unfairly benefitted at the expense of other account holders.”
In a previous settlement, Celsius recovered $100 million worth of funds from 1,500 account holders with preference liabilities that had a cumulative value of nearly half a billion dollars.
“Non-settling Celsius account holders can expect vigorous pursuit for the recovery of the full value of cryptocurrency transferred during the preference period,” said the Litigation Oversight Committee (LOC) on X.
One creditor, who goes by the X pseudonym “medx0,” claimed that Celsius is now seeking the value of cryptocurrency withdrawn as per current market value as opposed to the tokens’ value in 2022, when the crypto lender first froze withdrawals.
“Celsius Network has officially sued me and thousands of innocent users in New York courts this week,” said medx0.
“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 [centralized exchange].”
Celsius held over $20 billion in assets under management (AUM) from 1.7 million users during its peak, but was one of the crypto firms caught up in the fallout from the Terra ecosystem’s unraveling. The firm froze withdrawals in June 2022, and filed for bankruptcy a month later, attributing its liquidity issues to the “domino effect” of the LUNA collapse.
A bankruptcy court approved its reorganization plan in November, and as of January, the firm has started distributing $3 billion worth of crypto to creditors.
