The beleaguered cryptocurrency lender Celsius Network yesterday filed a motion in the U.S. Bankruptcy Court to allow customers with digital assets held in certain accounts to be withdrawn.
However, there are pitfalls as the motion only applies to custody and withered accounts and custody assets valued at $7,575 or less.
Celsius has built custody and withhold accounts that essentially act as storage wallets to help users maintain legal ownership of their cryptocurrencies.
However, this ownership does not extend to assets held in accounts that provide annual crypto earnings or borrowing services (earning and borrowing accounts).
Community reaction to the move was mixed, with creditors happy that the Celsius Network acknowledged funds held in “custody programs and withholding accounts likely to constitute property of their estates.” increase.
But as BnkToTheFuture.com CEO Simon Dixon tweeted, the community thinks the amount Celsius wants to release is far from fair.
#Celsius It now states that anything detained 90 days prior to filing should be withheld. Custody is currently at $210 million and wants to release $50 million. They want to reserve the rest for clawbacks.They believe all the money they earn belongs to #Celsius Opinion This is an illegal bank https://t.co/efGb3XPU2b
— Simon Dixon (Beware of Impersonation) (@SimonDixonTwitt) September 1, 2022
As Dixon points out, only $50 million of the $210 million held in custody accounts by 58,300 users will be released, and all funds above $7,575 will be Transferred from the Program and Borrowing Program to custody and withholding accounts and not included in released accounts. amount.
The amount of $7,575 is referred to as the “statutory cap” and pursuant to Section 547(c)(9) of the Bankruptcy Code, Celsius cannot avoid transferring any amount less than this sum at the request of a creditor. .
The documents also show that about 5,000 customers had an additional $15.33 million in their withholding accounts as of Monday.
To reach that $50 million figure, Celsius’ attorneys distinguished between “pure custody/withholding assets” and “transferred custody/withholding assets.” This division of funds has not been well received by members of the community.
In response to Celsius’s Twitter post on Friday, countless community members expressed a desire for all funds to be returned.
Kirkland (your attorney) has already argued that custody assets are not the property of Celsius. Doing anything other than completely releasing these assets is a complete violation of the TOS, as is creating a new layer out of nothing like “Pure Custody” which has no legal status. is.
— Johnny Buzz (@jBuzMSC) September 1, 2022
Celsius has stated that assets locked in the Acquisition and Borrowing Program are likely property of their property, and that transferring these assets to a custody or withhold account is a “transfer of the debtor’s property to the client.” to do”.
In the filing, Celsius said, “The relief sought in this motion is not supported by all customers or stakeholders, and some custody program customers and withholding account holders It may not be as close as you would like,” he said.
It suggests that the motion is merely “the first step, not the last word, to return assets to customers.”
Related: Celsius bankruptcy proceedings show complexity as hopes of recovery fade
The motion was filed a day after an ad-hoc group of 64 custodian account holders filed a complaint alleging that custodial assets “always belong to the user” according to the account’s terms and conditions, and the group paid $22.50. I am looking for more collection. billion assets.
A hearing on the motion is scheduled for October 6, and as it stands, users have had their assets locked on the platform for over two months.