Just when the crypto-verse was slowly coming to terms with the dramatic downfall of Terra, a prominent crypto lender, Celsius decided to freeze withdrawals. Soon after this, the network went on to file for Chapter 11 bankruptcy. The insolvent firm garnered immense backlash as its customers could not access their funds. Following this, a slew of similar crypto firms filed for bankruptcy. While the focus shifted to these other firms, Celsius was making headlines again.
It was recently revealed that an ad hoc group urged the New York Bankruptcy Court for the Southern District of New York to permit repayment of their funds. The group entailed about 64 individuals who reportedly held about $22.5 million in crypto on the platform.
Furthermore, the group assured that their crypto was in custodial accounts, not Celsius’s “Earn” product. The filing for the declaratory judgment points out that the “Custody Assets are not the property of the Debtors’ estates.” Therefore Celsius is obligated to return these funds to its users irrespective of the outcome of the bankruptcy proceedings. The filing further read,
“Following discussions with the Debtors and their advisors and the Creditors’ Committee and its advisors, Plaintiff has been unable to obtain return of its Custody Assets, and the Debtors have not lifted the freeze with respect to Plaintiff’s Custody accounts.”
Will Celsius’s customers get their funds back?
It should be noted that this 64-member group isn’t the first one to seek trapped funds. Several committees were formed to fight against Celsius, and the latest group differs from the Unofficial Committee of Creditors [UCC].
Additionally, a hearing would be later today to shed light on the motion above and other queries.
While the return of customer funds remains uncertain, it should be noted Celsius has been seeking the aid of Citigroup, Akin Gump Strauss Hauer & Feld, and management consultants from Alvarez & Marsal to address its current financial woes.