Following the Terra LUNA market crash in May, one of the largest crypto lending platforms in the world, Celsius Networks LLC went on to announce that they will be withholding their withdrawal services; which was another huge news for all the crypto investors. Earlier in June, the New Jersey based crypto lending company announced that it was pausing all withdrawals, swaps, and transfers between accounts, “due to extreme market conditions.”
Following the company filing for bankruptcy, one month after declaring that they are halting its withdrawal, swap, and transfer services, earlier in September they filed another litigation where they mentioned the return of custody holders’ funds to them. This was an incident that took place earlier, before a separate hearing that addressed the ongoing questions about Celsius’s efforts to restructure and relaunch its operations.
According to the Bloomberg report, US Bankruptcy Judge Martin Glenn ordered Celsius Network LLC to return the crypto assets that were never touched the lender’s interest-bearing accounts to its customers; on Wednesday, during the hearing.
According to the filing, the lending platform, Celsius has approximately 58,300 users who have collectively deposited over $210 million in assets with its custody and withhold, with about 15,680 customers holding “Pure Custody Assets” which is worth around $44 million. The Bankruptcy Court for the Southern District of New York, which is overseeing the Celsius case, had scheduled a hearing for October 6, 2022, to discuss the matter.
Countering the hearing verdict, Celsius argumented that other than the Celsius customers who are using the Earn or Borrow products of the lending platform, customers who have a custodial account nevertheless maintain ownership of their crypto assets. Celsius said that they were merely acting as the asset storage provider. Hence, these funds belong to the customers and are not a part of Celsius’ estate.
The Bloomberg report also mentioned that Celsius bored more than $200 million of assets in custody accounts as of September 2022. However, the majority of those coins were transferred into custody accounts from interest-bearing accounts shortly before the platform announced its bankruptcy. This situation means that Celsius will be able to claim ownership of those cryptos because of the rules surrounding so-called preferential transfers.
Source: Bloomberg; CoinDesk
Read more: Crypto Crash Recap Series (2022)
WHAT HAPPENED TO CELSIUS NETWORK?
Celsius is one of the biggest crypto lending platforms in the world which claimed to hold assets worth $20 billion according to PRNewswire. The memo addressing the Celsius community stated, ‘ We understand that this news is difficult, but we believe that our decision to pause withdrawals, Swap, and transfers between accounts is the most responsible action we can take to protect our community. We are working with a singular focus: to protect and preserve assets to meet our obligations to customers. Our ultimate objective is stabilizing liquidity and restoring withdrawals, Swap, and transfers between accounts as quickly as possible. There is a lot of work ahead as we consider various options, this process will take time, and there may be delays.’
Valued at $3.25 billion after extending its “oversubscribed” Series B financing round to $750 million in November, Celsius allows its users to deposit their tokens; Bitcoin, Ethereum and Tether; and receive weekly interest payments. Celsius has also offered to pay interest which can go as high as 18% a year to customers who will transfer their tokens to the platform, according to Reuters.
Read in detail about Crypto Lender Celsius Network here.