This week, Celsius bankruptcy trustees announced that they have begun filing lawsuits against customers who withdrew more than $100,000 in the 90 days leading up to the cryptocurrency exchange’s bankruptcy. How is this action justified?
Celsius sues customers who withdrew more than $100,000 before bankruptcy
Now 2 years ago, the cryptocurrency platform Celsius declared bankruptcyfollowing the catastrophic management of user funds that was later discovered. While the company officially announced its exit from bankruptcy last February, new legal proceedings were filed earlier this week.
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Thus, Celsius administrators have chosen to file a complaint against all users who withdrew more than $100,000 in the 90 days preceding the bankruptcy, namely between April 14 and July 13, 2022.
To justify such a practice, the company relies on the concept of “outstanding preference liabilities »or of unpaid preferential debts The term preferential implies that users who withdrew funds before the bankruptcy was announced would have been given preference over those who did not, on the grounds that this would leave fewer funds available for repayments.
Mohsin Meghji, Celsius's litigation administrator, commented on the decision:
Account holders who withdrew funds in the days leading up to Celsius's bankruptcy benefited unfairly at the expense of other account holders because the execution of their withdrawal requests prevented Celsius from fairly responding to other withdrawals.
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Note that this procedure concerns any user meeting the conditions previously mentioned and dismisses any idea of insider trading. The irony of the story is that Alexander Mashinsky, Celsius' CEO and founder, had withdrawn $10 million just before the platform's collapse, and he did so knowingly.
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Source: Press release
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Since 2021, I have devoted my free time to seriously training myself on cryptocurrencies in order to acquire as much knowledge and credibility as possible. I often have the opportunity to conduct interviews with influential figures in the blockchain industry. I also conduct in-depth analyses on Web3 themes to offer exclusive content to Cryptoast readers.
Vincent Maire
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