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Celsius Network, the troubled cryptocurrency lender, filed a motion with the United States Bankruptcy Court Wednesday to allow consumers with digital assets kept in specific accounts to withdraw them.
However, there is a catch: the motion will only apply to Custody and Withold Accounts, as well as custodied assets valued $7,575 or less.
Celsius has designed their Custody and Withhold Accounts, which essentially function as storage wallets, in such a way that customers can retain legal ownership of cryptocurrency.
However, this ownership does not apply to assets maintained in accounts that provide annual crypto profits or borrowing services (Earn and Borrow accounts).
The reaction to the motion has been mixed, with creditors pleased that Celsius Network has admitted that funds kept in its "Custody Program and Withhold Accounts likely do constitute property of their estates."
However, as BnkToTheFuture.com CEO Simon Dixon stated, the community believes the amount Celsius wants to release is far insufficient.
#Celsius currently stating that those that were moved to custody 90 days before filing should be withheld. Custody is now $210m & they want to release $50m. They want to reserve the rest for clawbacks. They believe all earn funds belong to #Celsius 🤮 OPINION This is illegal bank https://t.co/efGb3XPU2b
— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) September 1, 2022
According to Dixon, just $50 million of the $210 million held in custody accounts by 58,300 customers is expected to be released, with all funds exceeding $7,575 transferred from the Earn Program and Borrow Program into Custody and Withhold accounts not included in the released total.
The $7,575 figure is known as the "statutory cap," and Celsius is unable to avoid transferring sums less than this number in response to creditor requests under Bankruptcy Code section 547(c)(9).
According to the report, an additional $15.33 million is being held in Withhold Accounts by about 5,000 clients as of Monday.
Celsius attorneys have divided between "Pure Custody/Withhold Assets" and "Moved Custody/Withhold Assets" to arrive at the $50 million number, with "Pure" assets being those that were not transferred from the Earn or Borrow Programs. This distribution of monies has not been warmly welcomed by the community.
In response to Celsius's Friday Twitter tweet, a large number of community members have stated that they want nothing less than all of their monies returned.
As we continue to focus on maximizing value for all stakeholders, we want to share what we hope to be a positive first step towards meeting the expectations of our community and other important updates from our hearing today.
— Celsius (@CelsiusNetwork) September 1, 2022
According to Celsius, assets locked in the Earn and Borrow Programs are presumably the property of their estates, and transfers of these assets to Custody or Withhold accounts are defined as "a transfer of the Debtors' property to customers."
Celsius admits in the filing that the "relief requested in this Motion may not be supported by every customer or stakeholder, and may not go as far as some Custody Program customers and Withhold Account holders may like."
It implies that the move is just a "first step forward, not the final word on efforts to return assets to customers."
The petition comes just one day after an ad hoc group of 64 custodial account holders filed a complaint saying that, under the terms of the accounts, title of custody assets "always stays with the user," with the group trying to reclaim more than $22.5 million in assets.
A hearing on the motion is planned for Oct. 6, and users' assets have been locked up on the platform for more than two months.
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