On Wednesday, a US bankruptcy judge determined that certain Celsius Network clients should be entitled to their deposits back. This decision provides relief to a relatively limited number of customers whose deposits were never mixed with other funds from Celsius.
Judge Martin Glenn of the US Bankruptcy Court is debating the bigger issues of who actually owns the crypto assets that were placed with Celsius.
According to Celsius' official creditors committee, his decision on Wednesday was restricted to customers who had non-interest bearing custody accounts, whose funds were not mixed with other Celsius assets, and whose accounts were too small for Celsius to try to claw them back to pay other customers.
The amount at risk for owners of custody accounts was originally estimated by the creditors committee to be $50 million.
The ownership of Celsius "earn" accounts and "withhold" accounts has not yet been decided by Judge Glenn.
Earn accounts, which offered interest to consumers and allowed Celsius to use customer cash to create loans were the default account type at Celsius before regulatory probes prompted company to shift course early in 2022.
Those regulatory inquiries, which asserted that earn accounts were an unregistered securities sale, forced Celsius to create non-interest bearing custody accounts and withhold accounts.
In June, the New Jersey-based Celsius company stopped allowing withdrawals due to "extreme" market conditions, preventing individual investors from accessing their assets. Celsius declared $4.3 billion in assets and $5.5 billion in liabilities, the most of which were owing to its customers, when it filed for Chapter 11 bankruptcy in July.
By fLEXI tEAM