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Celsius Network Ltd., the crypto lender that filed for Chapter 11 bankruptcy protection on July 13, wants to release about $50 million worth of crypto assets to Celsius custodians. The Celsius depots reportedly did not participate in the earn and loan program. The court hearing on the relief case will take place on 6 October.
Court documents show Celsius wants to release roughly $50 million in funds to select customers. The debtor proposal seeks to “reopen withdrawals for certain customers with respect to certain assets held in the custody program and escrow accounts, and provide related relief.” Celsius filed for bankruptcy on July 13, 2022, after the company stopped “all withdrawals, exchanges 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 to the court asking for their funds to be released. One customer explained that it was about keeping a roof over the family and food on the table. Reports have indicated that Ripple Labs was interested in Celsius and the company’s assets, after the company asked for comment on bankruptcy court filings.
In mid-August, a Financial Times report, citing anonymous sources, alleged that Celsius Network CEO Alex Mashinsky controlled the crypto-lending company’s trading scheme and placed bad bets. On August 16, Celsius Network was approved by a bankruptcy court judge to sell bitcoin (BTC) the company previously mined to continue funding specific operations. In late August, the company sued Keyfi founder Jason Stone, claiming millions were stolen from the crypto lender’s wallets.
The month before, on July 7, 2022, Stone told the public that he had hired Roche Freedman LLP to bring Celsius to court. “I feel it is only prudent to finally set the record straight. I have taken legal action against Celsius to resolve this issue once and for all,” Stone said at the time. This week, the latest lawsuit explains that Celsius wants to release funds to a specific segment of customers. The customers held funds with Celsius using a custodial program, and the debtor proposal says these types of accounts are different.
While the custodians’ funds probably “do not amount to [as] the property of their properties,” earn or borrow customers “are likely to be the property of their properties,” the filing notes state. Celsius further declares that the escrow properties will not be released to “current or former employees or insiders, or affiliates of current or former employees or insiders.” The motion filed by Celsius further notes that the crypto-lending company understands that some customers may not like the proposed relief given to custodial holders. The court filing says:
The Debtors acknowledge that the relief sought in this proposal may not be supported by every customer or interested party.
What do you think about Celsius wanting to provide relief to custody customers? Let us know what you think about this topic in the comments section below.
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