Celsius Network ordered to return $44 million to customers

Getting your Trinity Audio player ready...

Some of Celsius Network’s customers are set to receive their funds back after a United States judge ordered the collapsed lender to refund a portion of the digital assets it currently holds.

U.S. bankruptcy Judge Martin Glenn ordered Celsius to release digital currencies worth $44 million and return them to its owners in the latest ruling on the landmark bankruptcy case.

“I want this case to move forward. I want creditors to recover as much as they possibly can as soon as they possibly can,” Judge Glenn ruled, as reported by Bloomberg.

There’s a catch, however. The funds to be refunded are only those held in the lender’s Custody accounts. This was the far less popular account offered by Celsius, where its customers only held their funds without expecting any income from their holdings. The company has acknowledged that funds held in these types of accounts belonged to the customers.

The $44 million represent only a quarter of the $200 million worth of digital assets held in Custody accounts. According to Celsius, only funds that have always been in Custody accounts and never touched the interest-bearing accounts are fully owned by the customers. Of the $200 million, over $155 million was transferred by quick-acting customers to Custody accounts from their interest-bearing accounts just before the bankruptcy. Celsius says such transferred funds do not qualify and are still legally owned by the company.

Kirkland (your counsel) already asserted Custody assets are not the property of Celsius. Doing anything besides releasing those assets in full is a complete violation of your TOS, as is your creation of new tiers out of thin air like “Pure Custody” which has no legal standing. 🤡

— johnnyBuz (@jBuzMSC) September 1, 2022

Customers who held their funds in the more popular Earn accounts to earn profits will have to wait much longer to get their funds back. Celsius believes it owns these assets, so much so that it filed a motion seeking to sell some of these assets to fund its reorganization.

Elsewhere, the lender has received the nod from Judge Glenn to splash $2.8 million in bonuses to its employees to stop them from leaving. When it first filed for bankruptcy, the company had 370 employees, but in the five months since then, 200 have quit.

“We’re getting really down to the nub of what we need to continue to function,” Ross Kwasteniet, an attorney at Kirkland & Ellis, argued in the hearing.

According to the filing, the retention payments will be no more than $75,000.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.