Bankrupt Celsius Seeks to Return $50m of Locked Crypto for Custody Holders
Nicholas Otieno Sep 02, 2022 04:15
The filing from Celsius comes a few days after a group of customers claiming about $25 million in custody holdings petitioned the court for payback of their funds.
Celsius Network, a bankrupt crypto lending firm, on Thursday, filed to return funds to crypto custody holders who are locked out of their accounts, Bloomberg reported.
The move by the company comes ahead of a separate hearing to address ongoing questions about its efforts to restructure and resume its operations.
Celsius asked a US bankruptcy judge for permission to release about US$50 million worth of cryptocurrency stuck on the platform in so-called custody accounts, which were designed to store digital coins rather than generate returns.
A full hearing on the request is scheduled for October 6. That is according to court papers from the Bankruptcy Court for the Southern District of New York, which is overseeing the case.
The move indicates a split among the many thousands of users adversely impacted by the company's bankruptcy.
The point is that unlike Celsius customers using its Earn or Borrow products, customers with custodial accounts still maintain ownership of their crypto assets. Celsius is just acting as the storage provider. These funds, therefore, belong to the customers, not to Celsius' resources.
Celsius has filed for a narrow re-opening of withdrawals, stating that not every customer would be eligible.
Celsius plans to refund about US$50 million to eligible customers. That is just a fraction of the more than $200 million in locked-in custody accounts on the platform.
That is because many users shifted their holdings from interest-bearing accounts into custody arrangements shortly before the bankruptcy.
The custody accounts are also just a small group of crypto users who have not recovered from Celsius. The market value of assets in so-called earn accounts totalled about US$4.2 billion, according to court papers, as of July 10.
In July, Celsius filed for Chapter 11 bankruptcy protections after it suspended customer withdrawals, swaps, and transfers in June. Users have been unable to withdraw crypto stored in Celsius accounts.
More than 300 disgruntled customers have filed letters with the bankruptcy court to demand the return of their funds. Celsius had a total of 1.7 million customers who are collectively owed some $4.7 billion.
Image source: Shutterstock