Several weeks later application for bankruptcy protectionTroubled cryptocurrency lender, Celsius Network, is seeking court approval to allow a small group of customers to withdraw their digital assets.
In a Thursday deposit With the United States Bankruptcy Court for the Southern District of New York, the cryptocurrency lender has requested the release of the owners of client assets held in its custody program and withholding accounts.
Celsius will release $ 50 million worth of resources to users
The motion aims to release approximately $ 50 million of the more than $ 225 million held in the custody and withholding program only to users whose assets have always existed in the two account types.
By design, Celsius’ custody and withholding accounts acted as storage wallets allowing users to retain legal ownership of their stored cryptocurrencies. However, the policy does not apply to users whose assets are held in accounts that offer annual cryptocurrency earnings or lending services, including Earn and Borrow accounts.
Users who transferred assets to custodial / withholding accounts before the company went underwater will not be eligible for the upcoming withdrawal. This is because the cryptocurrency lender has classified the holdings in these accounts as “Pure Custody / Asset Retention” and “Transferred Custody / Ownership Retention”.
The firm’s lawyers noted that the “pure” assets refer to cryptocurrencies that have not been transferred from the Earn or Borrow programs. Therefore, if the motion is passed, customers who transferred their assets from other Celsius accounts to the Custody Program 90 days prior to the company’s filing for bankruptcy would not be eligible to withdraw their assets.
Celsius’ segregation as to which account holders might be able to recover their funds is heavily influenced by the debate over which digital assets are owned by clients and which are part of the company’s assets in bankruptcy proceedings.
Recall that the company’s legal team had said that customers had transferred ownership of their digital currencies to the cryptocurrency lender when they deposited the assets on the platform. In other words, nearly 80% of user funds on the platform belong to Celsius as most of the assets are held Earn and borrow accounts.
The first step forward
The company acknowledged in its filing that most customers probably wouldn’t support the new deal. The cryptocurrency lender, however, pointed out that its latest move is only the first step it is taking to ensure customers get their funds back.
“The relief sought in this motion may not be supported by all customers or interested parties and may not go as far as some custody program customers and withholding tax holders may wish. This motion is a first step towards, and not the last word, efforts to return goods to customers wherever possible without jeopardizing the efforts of debtors to maximize value and distribute that value to all customers in the most effective way. fair as possible “, reads the document.
As of mid-May, Celsius had over $ 11 billion in assets under management (AUM). However, the company has blocked all withdrawals in June, citing extreme market conditions. Celsius is currently facing several lawsuits, including a fraud suit filed by his former money manager.
The United States Bankruptcy Court has scheduled a hearing for the proposed motion on October 6.
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