Celsius Network Ltd. is a crypto lender and filed for Chapter 11 bankruptcy protection July 13. They are looking to give roughly $50 million in crypto assets to Celsius custody accounts holders. According to reports, Celsius custody accounts didn’t participate in the Earn and Borrow program. The matter will be heard in court on October 6.
Celsius Files Debtors’ Motion to ‘Reopen Withdrawals for Certain Customers’
According to court documents, Celsius wants to make available funds worth approximately $50 million to some customers. The debtors’ motion seeks to “reopen withdrawals for certain customers with respect to certain assets held in the custody program and withhold accounts, and granting related relief.” Celsius filed for bankruptcy on July 13, 2022, after the company paused “all withdrawals, swaps, and transfers between accounts” a month earlier on June 12.
The Celsius bankruptcy process has been very extensive, and the lender’s customers have written letters to the court begging for their funds to be released. A customer stated that it was about keeping his family safe and eating well. Reports have shown Ripple Labs was interested in Celsius and the company’s assets, after the company asked to comment on bankruptcy court filings.
In mid-August, a Financial Times report, quoting anonymous sources, alleges that the CEO of Celsius Network, Alex Mashinsky, controlled the crypto lending company’s trading scheme and placed bad bets. Celsius Network received approval from the bankruptcy court judge on August 16 to sell Bitcoin (BTC). The company used bitcoins to finance specific operations. At the end of August, the company countersued the founder of Keyfi, Jason Stone, claiming millions were stolen from the crypto lender’s wallets.
Stone stated that on the 7th of July 2022 Stone informed the public that he had hired Roche Freedman LLC to help Celsius appear in court. “I feel it is only prudent to finally set the record straight. I have brought legal action against Celsius to settle this issue once and for all,” Stone said at the time. According to the court’s latest filing, Celsius has requested funds be released to only a few customers. The customers held funds with Celsius using a custody program, and the debtors’ motion says these types of accounts are different.
Bankrupt Company Is Aware the Latest Debtors’ Motion May Not Be Supported by Every Customer
While custody holders’ funds may likely “not constitute [as] property of their estates,” earn or borrow customers “are likely property of their estates,” the filing notes. Celsius further declares that the custody account assets will not be released to “any current or former employees or insiders, or affiliates of any current or former employees or insiders.” The motion filed by Celsius further notes that the crypto lending company understands that some customers may not like the proposed relief given to custody holders. According to the court filing:
Debtors acknowledge that not all customers or stakeholders will support the motion.
Do you have any thoughts about Celsius trying to provide relief to customers of custody accounts? Please comment below on your views.
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