The Lich in Munchkin Adventure Time

[Oberon Prime]

So their is a rather nasty monster card in Munchkin Adventure Time called The Lich. During my groups last play of the game we noticed he does not pursue players Level 5 or less.

Not quite sure what that means.

I thought it meant for the lucky level 2 player who drew the card that the monster is discarded no treasures or levels gained but also no bad stuff (which is significant for Tha card).

The player who drew the card thought he should still get the treasures if not the levels.

Which is appropriate?