As many of our readers
are aware, Jim Shenwick, Esq., a New York State licensed Bankruptcy attorney
with extensive crypto experience, is representing numerous Celsius customers
who have been sued in preference claw back adversary proceedings.
One of the most
frequent questions we receive is whether clients should settle with Celsius or
defend against the litigation. In this post, we'll explore why settling might
be the better option for most defendants.
Why Settlement May
Be Preferable
1. Legal Basis: While
many clients believe these lawsuits are baseless or unfair, Section 547 of the
Bankruptcy Code actually permits a debtor to file preference claw back actions.
Our law firm has defended these actions across various industries, including
retail, jewelry, garment, and crypto.
2. Cost of Defense:
Defending against these actions can be expensive. Costs include:
- Retaining an experienced attorney
- Participating in mediation (paying half
the cost)
- Engaging in discovery with the debtor
- Potentially going to trial before a
bankruptcy judge
3. Time and Resources:
These cases are often difficult and time-consuming to defend. Legal fees,
mediation costs, and expert witness fees can range from $25,000 to $100,000.
The process could take up to three years to reach trial.
4. Limited Defenses:
Common defenses in preference cases include:
- "Ordinary course of business":
This defense typically does not apply in crypto cases where most parties
invested and withdrew funds in a single transaction.
- "New value": This defense
requires that the customer bought more crypto from Celsius after their initial
withdrawal. We have not encountered this scenario in our cases.
5. Untested Legal
Arguments: Some attorneys and consultants suggest defenses based on Sections
546(c) and 546(g) of the Bankruptcy Code. However, these defenses require a
judge to classify crypto as either a commodity, a security or a swap agreement..
While some government agencies such as SEC and the CFTC have taken these
positions, we are not aware of any bankruptcy case that has made such a
determination.
The Case for Early
Settlement
1. Favorable Terms: In
our experience, earlier settlements in preference litigation often come with
more favorable terms for defendants.
2. Avoiding Escalating
Costs for Both Parties: If the debtor is forced to litigate, try the case and
prevails, settlements after judgment are likely to be significantly more
expensive for defendants then pretrial settlements.
3. Learning from
History: In the Madoff case, defendants who chose to litigate rather than
settle often ended up losing their cases, paying substantial legal fees and
expert witness fees, and having to pay the full judgment amount plus post judgment
interest of 9% per anum.
Our Recommendation
While each case has its
unique facts, we generally recommend that Celsius defendants do the following:
1. Hire an experienced
bankruptcy attorney with crypto knowledge.
2. Work towards
settling their cases as soon as possible and for the lowest amount achievable.
Our firm has
represented many Celsius defendants and has successfully settled numerous cases
on favorable terms for our clients.
Contact Information
If you're a Celsius
defendant looking to discuss your lawsuit or explore settlement options, please
contact:
Jim Shenwick, Esq.
Email:
jshenwick@gmail.com
Phone: 917-363-3391
To schedule a 15-minute
telephone consultation, please use this link: [Schedule a
Call](https://calendly.com/james-shenwick/15min)
Disclaimer: This blog
post is for informational purposes only and does not constitute legal advice.
Each case is unique, and you should consult with a qualified attorney to
discuss your specific situation.
