Bankrupt Celsius to Release $50 Million in Custody Client’s Funds

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Key Takeaways

  • Celsius to release nearly $50 million in digital assets belonging to customers who were a part of the “custody” program.
  • The Motion applies only to Custody and Withold Accounts and for custodied assets worth $7,575 or less in value.
  • Celsius’s Custody and Withhold Accounts enable users to maintain legal ownership of cryptocurrency, while Celsius customers using its Earn or Borrow products do not maintain ownership over their assets.

Bankrupt crypto lender Celsius Network has filed a motion with the United States Bankruptcy Court to reopen withdrawals for a minority of customers. As per the filing, Celsius has about 58,300 users who collectively deposited more than $210 million with its custody and withhold, with 15,680 customers holding “Pure Custody Assets” worth nearly $44 million.

The crypto firm states it wanted to release assets belonging to customers who were under the “custody” program—accounts that stored crypto but did not yield returns. This means the Motion will be applicable only to Custody and Withold Accounts and for custodied assets worth $7,575 or less in value.

“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,” the filing reads. “Accordingly, the debtors believe it is fair and appropriate to permit customers to withdraw those cryptocurrency assets at this time.”

The Motion in the filing is scheduled to be discussed on October 6. The fact that the withdrawal amount is only applicable for certain customers and is limited has angered the crypto community, with many seeking complete withdrawal. 

The Motion comes just one day after an ad hoc group of 64 custodial account holders petitioned the Bankruptcy Court for the Southern District of New York for a declaratory judgment to require the crypto lender to allow withdrawals from the custodial accounts.

According to the filing, the petitioner’s crypto is deposited in custodial accounts rather than the “Earn” product. Celsius’s Custody and Withhold Accounts enable users to maintain legal ownership of cryptocurrency, while Celsius customers using its Earn or Borrow products do not maintain ownership over their assets.

The filing claims, the customers should be able to receive and withdraw their funds back separately from the outcome of the bankruptcy filings and proceedings.

Celsius has stated that assets locked in the Earn and Borrow Programs are likely property of their estates, with transfers of these assets to Custody or Withhold accounts being described as “a transfer of the Debtors’ property to customers.

 The US crypto lender filed for Bankruptcy on July 13, and its custody accounts have crypto worth approximately $210.02 million locked away. The company has a $1.2 billion gap in its balance sheet, with most liabilities owed to its users.

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Saniya Raahath
Saniya Raahath

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