By
Chimamanda U. Martha
February 8th, 2024
According to the account holders, Celsius still holds the same type of cryptocurrencies that they deposited, and the funds remain separate from the rest of Celsius’ funds.
A group of custodial-account holders at crypto lender Celsius has requested the court overseeing the firm’s bankruptcy case to authorize the return of their funds.
On Wednesday, the ad hoc group requested a declaration judgment from the New York Bankruptcy Court for the Southern District of New York to compel Celsius to permit withdrawals from the custodial accounts.
According to the petition, the group is made up of 64 individuals who have at least $22.5 million in cryptocurrencies under Celsius’s care. It is, however, separate from the Unofficial Committee of Creditors (UCC), another organized set of Celsius customers.
The filing also states that the group’s crypto funds are not deposited in the yield-generating “Earn” program, but rather in custodian accounts held by Celsius. According to the petition, this means that Celsius should have kept the funds in segregated storage on behalf of the group’s members, who still have ownership of the money.
The statement asserts that, as a result, the customers should be entitled to get their money back regardless of the outcome of the bankruptcy proceedings.
“The Court made clear at various hearings that if custody assets are not property of the estate, such assets should be returned to users,” the filing said.
“Following discussions with the Debtors and their advisors and the Creditors’ Committee and its advisors, Plaintiff has been unable to obtain the return of its custody assets, and the Debtors have not lifted the freeze with respect to Plaintiff’s custody accounts.”
According to the account holders, Celsius still holds the same type of cryptocurrencies that they deposited, and the funds remain separate from the rest of Celsius’ funds. The crypto lender, therefore, has the ability to allow them to withdraw their funds but just hasn’t done so.
“The Debtors’ continued refusal to honor withdrawals of all custody assets has created tremendous hardship on their users, as set forth in hundreds of letters filed on the docket and in statements made by users at hearings in the Chapter 11 Cases. As it is not the debtor’s property, the debtors should not continue to hold custody assets during the Chapter 11 Cases and cannot use them to pay the debtors’ creditors’ claims,” the filing further read.
Earlier last month, Jason Stone, a former Celsius employee and current CEO of KeyFi, filed a complaint against Celsius Network, accusing the cryptocurrency lender of manipulating the market.
“This action arises from the defendants’ incompetence, deceit, and conversion. The lender labels KeyFi and Stone as “not just incompetent, they were also thieves,” he stated.
Celsius filed for bankruptcy proceedings in July after freezing withdrawals in mid-June. The company is hoping to reorganize its operations and use the money made by a mining operation that is currently being built to survive.