The cryptocurrency lending company known as Celsius Network Ltd., which filed for Chapter 11 bankruptcy protection on July 13, is attempting to distribute around $50 million worth of cryptocurrency assets to customers who possess Celsius custody accounts. According to what has been gathered, the Celsius custody accounts did not take part in the earn and borrow scheme. On October 6, the court hearing that will take place regarding the topic of relief will take place.
The Debtors’ Committee of Celsius has filed a motion to “Reopen Withdrawals for Certain Customers.”
According to the court records, Celsius is planning to distribute approximately 50 million dollars in funds to a limited group of clients. “reopen withdrawals for certain clients with relation to certain assets held in the custody program and withhold accounts, and awarding associated remedy,” reads the motion filed by the debtors. The bankruptcy petition for Celsius was submitted on July 13, 2022, one month after the corporation halted “all withdrawals, swaps, and transfers between accounts” on June 12.
The bankruptcy proceeding for Celsius has been quite drawn out, and many of the lender’s customers have penned petitions to the court pleading for the court to order the lender to return their monies. One of the customers mentioned that it was important to him to provide for his family by putting food and a roof over their heads. Following a request by Celsius for a comment on the company’s bankruptcy court filings, it has been reported that Ripple Labs has an interest in both Celsius and the company’s assets.
Midway through the month of August, the Financial Times published a piece in which it asserted, citing unnamed sources, that the Chief Executive Officer of Celsius Network, Alex Mashinsky, controlled the trading system of the cryptocurrency loan company and placed poor bets. The judge presiding over Celsius Network’s bankruptcy case gave the company permission on August 16 to sell bitcoin (BTC) that it had mined in the past so that it could maintain funding for certain operations. The company filed a countersuit against Jason Stone, the founder of Keyfi, at the end of August, saying that millions of dollars were taken from the cryptocurrency lender’s wallets.
On July 7, 2022, one month earlier, Stone disclosed to the general public that he had retained Roche Freedman LLP to take Celsius to court. “I have come to the conclusion that it is only prudent to finally clear the air. Stone stated that during that time, “I have brought legal action against Celsius in order to settle this issue once and for all.” In the most recent court document, which was submitted this week, Celsius states that it wants to distribute monies to a select subset of its consumers. The debtors’ action states that custody accounts are distinct from other sorts of accounts, and the customers retained their funds with Celsius through one of these custody programs.
The insolvent company is aware that the most recent creditors’ motion could not have the support of all of its customers.
According to the lawsuit, custody holders’ cash “may not constitute [as] property of their estates,” but consumers who earn or borrow money “are presumably property of their estates.” Further, Celsius has stated that the money held in the custody account will not be distributed to “any current or former employees or insiders, or affiliations of any current or former employees or insiders.” The motion that was submitted by Celsius also adds that the cryptocurrency loan company is aware that the proposed relief that would be provided to custody holders may not be to the liking of certain of its customers. According to the document filed in court:
The debtors are aware of the possibility that the relief requested in this motion will not have the backing of all of the customers or stakeholders.