Celsius Files to Resume Withdrawals for Select Customers
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Several weeks later applying for bankruptcy protectiontroubled cryptocurrency lender Celsius Network is seeking court permission to allow a small group of customers to withdraw their digital funds.
Inside something Filing on Thursday With the U.S. Bankruptcy Court for the Southern District of New York, the crypto lender requested that the assets of customers in the custody program and escrow accounts be released to the owners.
Celsius will release $50 million worth of assets to users
The proposal seeks to release about $50 million of the more than $225 million held in the custodial program and escrow accounts only to users who have always held assets in both types of accounts.
By design, Celsius Custodial and Custodial Accounts act as custodial wallets, while allowing users to retain legal ownership of their stored cryptocurrencies. However, the policy does not apply to users whose funds are in accounts that provide annual crypto income or lending services, including Earn and Loan accounts.
Users who have moved assets into custodial/hold accounts before the company went under will not be eligible for future withdrawals. This is because the cryptolender has classified the holdings in these accounts as “pure custodial/held assets” and “transferred custodial/held assets”.
The company’s lawyers noted that “clean” funds refer to cryptocurrencies that have not been transferred from the Earn or Loan programs. Therefore, if the motion is approved, customers who moved their funds from other Celsius accounts into the custodial program 90 days before the company filed for bankruptcy will not be able to withdraw their assets.
Celsius’ differentiation of which account holders can get their money back is heavily influenced by the debate over which digital assets are owned by customers and which are part of the company’s assets in bankruptcy proceedings.
Recall that the company’s legal team had argued that customers transferred ownership of their digital currencies to the cryptolender when they deposited funds on the platform. In other words, almost 80% of the users’ funds on the platform belong to Celsius, because the majority of the funds are Earn and borrow accounts.
The first step forward
The company admitted in its application that most customers are unlikely to support the new arrangement. However, the crypto lender noted that its latest move is just the first step it is taking to ensure that customers get their money back.
“Not all customers or stakeholders may support the relief requested in this motion, and it may not go as far as some custodial program customers and escrow account holders may wish. This motion is the first step, and not the last word, in efforts to return assets to customers as much as possible without jeopardizing the efforts of debtors to maximize value and distribute that value to all customers as fairly as possible,” the filing says.
As of mid-May, Celsius had more than $11 billion in assets under management (AUM). However, the company froze all withdrawals in June due to extreme market conditions. Celsius is currently facing several lawsuits, including a fraud case filed by its former cashier.
The U.S. Bankruptcy Court has scheduled an October 6 hearing on the proposed motion.
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