Celsius Network May Require Funds Return by Court Order

• Crypto lender Celsius Networks’ customers still want their money back.
• Celsius maintains that only “pure” custodial account holders are eligible.
• A ruling on the matter has not yet been made.

According to a report by Aaron Bennett, Customers of Earn and Borrow, who anticipated some type of profit or benefit, disagree with Celsius clients who feel that any custodial account holder. i.e any customer who deposited funds in a custody account but held ownership of the assets should receive their monies.

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The three-hour meeting on Thursday was largely devoted to discussing whether or not custodial account holders should be allowed to get their money back and which custodial account holders are eligible. 

This distinction is crucial because 89 days after launching its custodial wallet for consumers, the lender applied for Chapter 11 bankruptcy protection. Under U.S. law, money transferred 90 days before Celsius filed for bankruptcy may be susceptible to clawback.

The timing of the filing raised concerns from Celsius depositors, but a Kirkland & Ellis attorney for Celsius insisted there were “no conspiracies” and refuted any intentionality.

Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York postponed making a decision on the issue despite making multiple attempts to do so.

According to the complaint, “the Court made explicit at various sessions that if custody assets are not estate property, such funds should be given to users.” 

“Following discussions with the Debtors and their advisors, as well as the Creditors’ Committee and its advisors, Plaintiff has not been successful in getting the return of its custody assets, and the Debtors have not lifted the freeze with regard to Plaintiff’s custody accounts,” the complaint states.

Attorneys also debated how much consumer information would be made public as the case developed in addition to the issue of customer payments. After hearing arguments on both sides on the cybersecurity hazards, Judge Glenn changed his mind about redacting the home and email addresses of creditors from the public docket.

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