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Celsius Seeks to Resume Withdrawals for Limited Number of Customers

02-Sep-2022 By: Ashish Sarswat
Celsius Seeks to Res

Celsius Network, the troubled cryptocurrency lender, filed a motion with the United States Bankruptcy Court on Thursday to allow customers with digital assets held in specific accounts to be withdrawn.

However, there is a catch: the motion will only apply to Custody and Withold Accounts, as well as custodied assets valued at $7,575 or less.

Celsius has designed their Custody and Withhold Accounts, which effectively function as storage wallets, in such a way that customers may retain legal ownership of cryptocurrency. However, this ownership does not apply to assets held in accounts that offer yearly crypto profits or borrowing services (Earn and Borrow accounts).

The community's reaction to the motion has been mixed, with creditors relieved that Celsius Network has admitted that funds stored in its Custody Program and Withhold Accounts are likely property of their estates.

However, as CEO Simon Dixon tweeted, the community feels the amount Celsius plans to release is far insufficient.

As Dixon points out, just $50 million of the $210 million held in custody accounts by 58,300 customers is expected to be released, with all funds exceeding $7,575 moved from the Earn Program and Borrow Program into Custody and Withhold accounts not included in the released amount.

The $7,575 figure is known as the "statutory cap," and Celsius is unable to avoid transferring sums less than this amount in response to creditor requests under Bankruptcy Code section 547(c)(9).

According to the statement, an additional $15.33 million was held in Withhold Accounts by approximately 5,000 clients as of Aug. 29.

Celsius attorneys have distinguished between "Pure Custody/Withhold Assets" and "Transferred Custody/Withhold Assets" to reach the $50 million figure, with "Pure" assets being those that were not transferred from the Earn or Borrow Programs. This distribution of funds has not been warmly welcomed by the community.

In reaction to Celsius's Sept. 2 Twitter post, some community members have said that they want nothing less than all of their funds back.

According to Celsius, assets locked in the Earn and Borrow Programs are likely property of their estates, and transfers of these assets to Custody or Withhold accounts are considered as a transfer of Debtors' property to customers.

Celsius acknowledges in the filing that the relief requested in this Motion may not be supported by every customer or stakeholder and that it may not go as far as certain Custody Program customers and Withhold Account holders may not think it goes far enough.

It implies that “the motion is only a first step and not the last word on attempts to restore assets to customers.”

The motion comes just one day after an ad hoc group of 64 custodial account holders filed a lawsuit asserting that, under the terms of the accounts, title to custody assets always stays with the user, with the group trying to reclaim more than $22.5 million in assets. A hearing on the motion is scheduled on Oct. 6, and users' assets have been locked up on the platform for more than two months.

Read also: Babylon Finance had to close after a hack.

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