Celsius Requests to Reopen Withdrawals for Select Customers

Troubled crypto lender Celsius, which filed for bankruptcy back in July, is seeking to allow customers to withdraw their digital asset from certain accounts, court documents filed on 1 September show.

In its filing — submitted to the Bankruptcy Court for the Southern District of New York on Thursday — Celsius says that assets held in its Custody and Withhold Accounts were not property of the company, and that withdrawals should be enabled for owners of such accounts. The company argued, however, that while users of the custody program maintained ownership of their crypto, assets in accounts that offered annual crypto earnings or borrowing services were property of its estate. Celsius wrote in its filing:

“The Debtors believe that assets in the Earn Program and the Borrow Program are likely property of their estates, and that the transfer of such assets to Custody Program or the Withhold Accounts would have been a transfer of the Debtors’ property to customers on account of such customers’ claims against the Debtors.”

Although Celsius has around $210 million worth of assets in its custody accounts — deposited collectively by 58,300 users — the Thursday filing shows that it intends to return roughly $50 million, with the withdrawals only being valid for custody assets worth $7,575 or less. In order to reach this figure, Celsius’ lawyers separated the “Custody/Withhold Assets” into “Pure” and “Transferred” ones, with “Pure” being those not transferred over from the Earn or Borrow Programs. A hearing to discuss the proposal has been scheduled for 6 October.

Celsius’ proposal came only a day after a group composed of 64 custodial account holders filed a complaint with the bankruptcy court, requesting they are allowed to recover more than $22.5 million worth of digital assets from the crypto lender. The filing pointed to Celsius’ own terms of use, which state that the right to any digital assets in its custody accounts “always remains with the user” and not be transferred to the company.

The crypto lender paused all withdrawals on its platform on 13 June citing “extreme market conditions”, but only a month later — after repaying its debts to DeFi platforms Compound, Aave, and Maker — filed for Chapter 11 bankruptcy protection. Recent court documents have shown that the company has more than $6.7 billion in liabilities while its assets are worth around $3.9 billion, resulting in a balance sheet hole of $2.8 billion.