CelsiusCrypto investors have seen the worst of financial winters in 2022. However, that narrative is about to change for some Celsius crypto investors. Recent reports indicate that a U.S. bankruptcy judge involved in the Celsius Networks bankruptcy case has ordered the crypto lender to refund $50 million worth of crypto to custody account holders.
According to court records, the crypto exchange filed for bankruptcy in July with approximately $167 million in cash on hand and assets worth $4.3 billion while owing over $4.7 billion to consumers. The company suspended user accounts on June 13 as the value of cryptocurrencies plummeted, and numerous investors attempted to withdraw funds.
Celsius custody account holders might survive the crypto winter
In September, roughly a month after declaring for bankruptcy in July, Celsius filed to restore custody holders’ funds. The filing came in advance of a separate hearing to address ongoing concerns regarding the company’s efforts to restructure and relaunch its operations. According to Bloomberg, United States Bankruptcy Judge Martin Glenn issued the verbal order during a hearing on December 7.
According to the petition, Celsius has around 58,300 consumers who have deposited more than $210 million with its custody and hold service. In addition, approximately $44 million worth of “Pure Custody Assets” are held by 15,680 of these customers. The Bankruptcy Court for the Southern District of New York, which has jurisdiction over the case, has scheduled an October 6 hearing to consider the subject.
It is critical to clarify that this ruling only relates to pure custody assets — those that have never been deposited into Celsius’ Earn accounts and have always been held in the custody program. Martin Glenn, the United States bankruptcy judge, states:
I want this case to move forward. I want creditors to recover as much as they possibly can as soon as they possibly can.
Judge Martin Glenn
The sum is a minimal portion of the billions Celsius owes its creditors. The most recent ruling is the result of an agreement between the firms advisers and stakeholders that the cryptocurrency put in the custody accounts belonged to the platform’s users and not the platform itself.
Alternatively, the majority of the $4.7 billion in user funds are currently locked up in Celsius’ Earn accounts, which are the accounts that allow depositors to earn interest.
Celsius’s argument and repayment plan
The crypto entity argued that contrary to clients of its Earn or Borrow programs, customers with custodial accounts retain control of their crypto assets. Therefore, these funds belong to the clients and not to the estate of Celsius. The firm was only the source of storage space.
In addition, a report published by Bloomberg on December 5 indicates that the crypto exchage intends to liquidate $18 million worth of stablecoins stored in these accounts to support its reorganization. On December 12, Judge Glenn is scheduled to consider the issue of fund ownership. Meanwhile, on December 5, the judge approved the lender’s $2.8 million key employee retention program (KERP) that was filed on October 11.
The bonuses will be paid to a subset of employees in an effort to retain them so that the company may continue its limited commercial operations. Compared to the 370 employees the firm had before it initiated bankruptcy procedures, barely 170 remain with the company.
Court gives Celsius a restructuring deadline
The insolvent cryptocurrency exchange has set a new deadline to submit its reorganization plan. The court ordered that it be submitted by February 15th. In a Twitter thread on Monday, Celsius highlighted the new development. According to reports, the failing company has approximately two months to produce a Chapter 11 plan outlining how it can optimize profits for all creditors and stakeholders.
The Chapter 11 reorganization plan is a document outlining how a bankrupt entity expects to repay its creditors. Celsius hopes to create a standalone business within this timeframe and investigate more restructuring options.
This morning in court, the Celsius team discussed their application to request permission to sell stablecoin. According to the most current reports, the move aims to provide cash for their ongoing operations while maximizing value for all parties involved. However, the judge has stated that he will announce his decision in the coming days.
According to reports from last month, Celsius has recently paid a legal fee of around $5.6 million. This insolvent cryptocurrency lending platform recruited a number of law firms to assist them with their ongoing bankruptcy proceeding.
There is a great deal of uncertainty regarding the remaining investors. The process will take months or maybe years for investors to determine how to proceed with their crypto assets.
Land a High-Paying Web3 Job in 90 Days: The Ultimate Roadmap
