Celsius Network Ltd., the crypto lender that filed for Chapter 11 bankruptcy protection on July 13, is looking to release roughly $50 million worth of crypto assets to Celsius custody account holders. Reportedly, the Celsius custody accounts did not participate in the earn and borrow program. A court hearing concerning the matter of relief will take place on October 6.
Celsius Files Debtors Proposal to ‘Reopen Withdrawals for Some Customers’
Court documents show that Celsius intends to release funds of around $50 million to select customers. Debtors’ resolution seeks to “reopen withdrawals and stop accounts, and provide related relief, in respect of certain assets placed in the custody program for certain clients.” Celsius filed for bankruptcy on July 13, 2022, after the company had stopped “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. One customer explained that it was a matter of keeping a roof over his family and food on the table. 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 report in the Financial Times, citing anonymous sources, alleged that Alex Mashinsky, CEO of Celsius Network, controlled the crypto lending company’s trading scheme and made bad bets. On August 16, Celsius Network was approved by a bankruptcy court judge to sell bitcoin (BTC) the company had previously mined in order to continue funding specific operations. In late August, the company countered Keyfi’s founder, Jason Stone, claiming that millions had been stolen from the crypto lender’s wallet.
The month before, on July 7, 2022, Stone told the public he hired Roche Freedman LLP to bring Celsius to 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. This week, the latest court filing explains that Celsius wants to release funds to a specific sliver of customers. The customers held funds with Celsius using a custody program, and the debtors’ motion says these types of accounts are different.
The bankrupt company is aware that the latest debtors’ proposal may not be supported by every client.
While custody holders’ funds likely “may not be formed” [as] The assets of their custodial account are potential assets of their “earning or borrowing customers,” the filing notes. Celsius further declares that the assets of the custodial account are “any current or former employees or insiders, or any existing or former employees or associates of insiders.” The motion filed by Celsius further states that the crypto lending company understands that some customers may not like the proposed relief offered to custody holders. In a court filing Having said:
The debtors recognize that the relief sought in this motion may not be supported by every customer or stakeholder.
