Celsius, the once-popular crypto staking, lending, and exchange platform, has recently sparked outrage with its aggressive clawback attempts. After shifting its focus to Bitcoin mining following its bankruptcy case, the platform has taken a drastic step to recover funds from former clients. This move comes after Celsius raised the “unsecured creditors” argument in court to appropriate client funds. Now, the platform is demanding that users who withdrew more than $100,000 within 90 days prior to the bankruptcy declaration “resolve their outstanding liability” or face litigation.
Lawyers from Kirkland & Ellis, representing Celsius, have labeled the act of withdrawing funds before bankruptcy as “avoidance actions.” These actions can be pursued in court, and according to a notice submitted by the legal team, creditors must return 27.5% of their withdrawn funds by the 31st of January or face clawbacks. This demand applies to account holders who did not accept the Custody Settlement or do not have a Class 6A General Custody Claim.
Celsius argues that these measures are part of their preparations to repay creditors and ensure a fair distribution of funds in accordance with the restructuring agreement. The platform claims that by implementing these requirements, individuals who withdrew significant amounts but still had assets trapped on the platform will have the opportunity to receive some of their funds. However, critics question the fairness of these demands, especially considering that Celsius itself brought up the “unsecured creditors” argument in court.
The notice published by Celsius’ legal team outlines the steps that clients must take to settle their liabilities and be released from the avoidance actions. However, the enforceability of these clawback attempts is far from certain. The success of such attempts has varied in the past, and it’s unclear whether Celsius’ approach will hold up in court. Clients who receive the notice can choose to sign the agreement, but its enforceability may become a major point of contention.
If Celsius’ clawback attempts prove successful, it may set a precedent for other bankrupt platforms to follow suit. While other platforms, such as FTX, have made clawback attempts with varying degrees of success, the initiative to recoup funds from private investors is unprecedented. However, given the potential controversy and legal challenges, it remains to be seen whether other platforms will adopt a similar approach.
It is likely that Celsius’ clawback attempts will be met with resistance and legal challenges from affected clients. The fairness and legality of demanding a portion of already withdrawn funds may be fiercely debated in court. If the move proves successful, it could significantly impact the relationship between crypto platforms and their users, potentially leading to increased scrutiny and caution from clients.
Celsius’ clawback attempts have raised eyebrows within the crypto community. While the platform argues that these measures are necessary to ensure a fair distribution of funds to creditors, critics question the fairness and legality of demanding a portion of already withdrawn funds. The enforceability of these clawbacks remains a significant point of contention, and the outcome of the courtroom battle may shape the future actions of other bankrupt platforms. As the crypto industry continues to evolve, striking a balance between protecting the interests of platforms and respecting the rights of clients will be crucial for maintaining trust and confidence in the sector.
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