Celsius pushes for $50 Million in Assets to consumers who have digital assets in Custody and Withhold accounts.
The embattled cryptocurrency lender Celsius Network is asking the court for permission to let a select number of customers withdraw their digital assets, weeks after filing for bankruptcy protection.
The cryptocurrency lender filed a motion to release client assets held in its custody program and withhold accounts to the owners on Thursday with the United States Bankruptcy Court for the Southern District of New York.
Celsius Will Make Available to Users $50 Million in Assets
Only users with assets that have always been in the Custody Program and Withhold Accounts will be granted access to about $50 million of the more than $225 million kept in those account types, according to the motion.
Custody and Withhold Accounts on Celsius were created to act as storage wallets while also preserving users’ ownership of the digital currencies they stored.
However, the policy does not apply to users whose assets are kept in Earn and Borrow accounts or other accounts that provide annual crypto earnings or borrowing services.
Users who moved funds to Custody/Withhold accounts prior to the company’s financial collapse will not be qualified for the impending withdrawal.
The reason for this is that the cryptocurrency lender divided the assets in these accounts into “Pure Custody/Withhold Assets” and “Transferred Custody/Withhold Assets.”
The attorneys for the company pointed out that the term “pure” assets refer to digital currencies that have not been moved from the Earn or Borrow Programs.
Accordingly, if the motion is granted, clients who moved their money from other Celsius accounts to the Custody Program 90 days prior to the firm filing for bankruptcy would not be permitted to withdraw their assets.
The argument over which digital assets are held by customers and which are included in the company’s estate in the bankruptcy proceedings significantly affects Celsius’s division of which account holders may be able to recover their monies.
If you recall, the firm’s legal counsel had contended that when clients deposited assets on the platform, they gave ownership of their digital currencies to Celsius.
With the majority of the assets being stored in Earn and Borrow accounts, this means that approximately 80% of user monies on the platform belong to Celsius.
The first step
In its submission, the business admitted that the majority of customers would probably not approve of the new arrangement.
However, the crypto lender emphasized that this is just the first step in a series of measures it is doing to make sure that consumers get their money back.
“The relief sought in this motion may not be supported by every customer or stakeholder, and that it may not go as far as some Custody Program customers and Withhold Account holders may wish. This motion is a first step toward, and not the last word on, efforts to return assets to customers where possible without jeopardizing the Debtors’ efforts to maximize value and distribute that value to all customers as fairly as possible,” the filing reads.
Over $11 billion in assets were being managed by Celsius as of mid-May (AUM). Nevertheless, the business halted all withdrawals in June, citing severe market conditions.
Numerous legal actions have been brought against Celsius, including a fraud claim made by its former money manager.