Beleaguered crypto lender Celsius Network has filed a petition in the United States Bankruptcy Court yesterday to allow customers to withdraw digital assets held in certain accounts.
There’s a catch because this move will only apply to Custody and Withold Accounts and to custodied assets worth $7,575 or less in value.
Celsius has structured their Custody and Withhold Accounts, to help users to maintain legal ownership of cryptocurrency.
However, this right does not include assets held in accounts that provide annual crypto earnings or borrowing services (Earn and Borrow accounts).
Community response to the proposal has been mixed, and lenders are pleased that Celsius Network has recognized the funding it has.
The community response to the motion has been mixed, with creditors pleased that Celsius Network has conceded funds held in its “Custody Program and Withhold Accounts likely do constitute property of their estates.”
However, as Simon Dixon, CEO of BnkToTheFuture.com wrote on Twitter, the community believes the amount Celsius wants to release is far short of what is equitable.
Only $50 million of the $210 million held by 58,300 users in custody accounts is set to be released, as Dixon notes, with all funds above $7,575 which were transferred from the Earn Program and Borrow Program into Custody and Withhold accounts not included within the released amount.
The $7,575 amount is called the “statutory cap” and Celsius cannot avoid transferring amounts less than this total upon creditor requests as per section 547(c)(9) of the Bankruptcy Code.
The filing also shows that as of Aug. 29 an additional $15.33 million is held in Withhold Accounts by approximately 5,000 customers.
To arrive at the $50 million figure, Celsius lawyers have distinguished between “Pure Custody/Withhold Assets” and “Transferred Custody/Withhold Assets,” “Pure” assets here are those which were not transferred from the Earn or Borrow Programs. This division of funds has not been well accepted by community members.
In response to a Sept. 2 Twitter post from Celsius, countless community members said they wanted nothing less than full investment
Celsius states 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.
Within the filing, Celsius claims that 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 customer and Withhold Account holders may wish.”
It suggests the motion is merely a “first step forward, and not the last word on, efforts to return assets to customers.”
The motion comes just one day after an ad hoc group of 64 custodial account holders filed a lawsuit alleging that title to custody assets “always remains with the user” as per the accounts’ terms of use, with the group seeking to recover more than $22.5 million worth of assets.
A hearing on the petition is scheduled on Oct. 6, and as it stands, users have had their assets locked up on the platform for more than two months.
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