Bankrupt crypto lender Celsius today said in a court filing that it would seek to return some—but not all—of its customers’ funds.
The company said it wanted to release nearly $50 million in digital assets belonging to customers who were a part of the “custody” program—accounts that stored crypto but did not generate returns.
Celsius said in the filing that customers of the custody program owned their assets, while customers using the Celsius “earn” or “borrow” programs had invested their assets expecting a return.
What Is Celsius and Why Is It Crashing?
Amid a wider crypto market crash, crypto lending platform Celsius announced on June 12 that it was suspending all withdrawals on its lending platform, citing “extreme market conditions” and a need to “stabilize liquidity.” In the hours after the announcement, Celsius’ native token, CEL, plummeted by 70% in a single hour; by the following day it was trading at over 40% down. CEL’s downward spiral came amid a giant selloff that saw crypto’s total market capitalization plunge to less than a trilli...
“The debtors have identified significant cryptocurrency assets that they do not believe are property of their estates, and as to which the debtors do not believe that they have any colorable causes of action under applicable law,” Today’s filing said. “Accordingly, the debtors believe it is fair and appropriate to permit customers to withdraw those cryptocurrency assets at this time.”
Today’s notice came after custody customers asked a judge on Wednesday to have their funds returned to them separately from the bankruptcy proceedings.
In the filing, Celsius affirmed the need for caution in determining which assets to return, to whom, and when.
“Allowing customers to withdraw property that could be subject to later avoidance actions would be akin to choosing to drain a sink full of water, and then trying to collect the water after it had drained through the pipes,” the debt holders wrote. “Incredibly wasteful and inefficient if your goal is to maximize water for later allocation and distribution.”
Even if approved, the returned funds would just a small piece of the bigger picture: Celsius custody accounts have crypto worth approximately $210.02 million locked away, according to today’s filing.
And in total, Celsius owes its customers who used its popular “earn” program $4.3 billion in digital assets.
Celsius Creditors Move to Block Company From Selling Mined Bitcoin
Celsius Network’s unsecured creditors have been pressing the company on “potential misconduct by Celsius and its insiders.” During a hearing in the Chapter 11 bankruptcy proceeding today, the committee moved to block Celsius’s attempts to sell some of its mined cryptocurrency. Celsius Mining is the Bitcoin mining subsidiary of Celsius Network, the embattled crypto lender that filed for bankruptcy on July 13. A day later, the mining operation joined its parent company in the bankruptcy filing....
The motion in today’s filing is scheduled to be discussed at an October 6 hearing.
The crypto lender had promised huge returns to its customers but stopped user withdrawals in June due to “extreme market conditions.” It then filed for bankruptcy in July—with papers showing its liabilities outweigh its assets by $1.2 billion.
