In a report submitted to the New York Chapter Court, Celsius Network reported that it was temporarily restarting withdrawals to refund 22 percent of the funds to its customers, or approximately $48 million.
Another lawsuit has been filed in US bankruptcy court by Celsius Community. The struggling crypto lending platform asks authorization to release $48 million in frozen money. The government created custodial accounts to be storage wallets rather than return-earning wallets. The hearing will take place on October 6, according to court documents.
As we continue to focus on maximizing value for all stakeholders, we want to share what we hope to be a positive first step towards meeting the expectations of our community and other important updates from our hearing today.
— Celsius (@CelsiusNetwork) September 1, 2022
Following a month of halting all platform transactions because of “high market conditions,” Celsius filed for bankruptcy in July.
What Does the Court Say?
According to the court filing, customers who used Celsius’s earn-and-borrow services freely gave up ownership of their funds to the company, while customers who just deposited funds for storage kept ownership.
🤑 Celsius Faces Another Group of Customers Who Want Their Money Back 🤑
🧵👇
1/9 A group of custodial-account holders at Celsius has formally asked the court overseeing the crypto lender’s bankruptcy case to authorize the return of their funds.
— ALLINCRYPTO (@RealAllinCrypto) September 1, 2022
A bankruptcy filing by Celsius Community indicates that the company still has $48 million in debt, with over $200 million in “custodial accounts.” Bloomberg reports that buyers moved their investment from an interest-bearing account to a custodial account before the process began.
It is our belief that the cryptocurrency assets in the Custody and Withhold accounts likely do not constitute property of the estate and we will work with the UCC to determine which accounts may be impacted, subject to the motion’s approval.
— Celsius (@CelsiusNetwork) September 1, 2022
Documents filed with the court also estimate that as of July 10, the earned accounts on the platform had nearly $4.2 billion in user funds. A crypto lending platform called Celsius Community was launched in 2017. In addition to bitcoin lending and borrowing, the site would offer high-interest rates.
The company’s high market conditions caused it to stop firm withdrawals. Kirkland & Ellis LLP has been hired to handle judicial proceedings for Celsius Community’s reorganization.
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