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Celsius Networks has filed a motion seeking to return some of the money it owes its investors, but it will only be refunding $50 million of the more than $200 million trapped in custody accounts on its platform—but there’s a catch. The company said it will only refund those who didn’t seek to make money through its Earn program.

Celsius filed the motion on Thursday, September 1, at the Bankruptcy Court of the Southern District of New York, terming the move a “positive first step towards meeting the expectations of our community.”

The lender filed for Chapter 11 bankruptcy in July and only wants to return $50 million of the $210 million held by close to 60,000 users in custody accounts. It specified that to qualify for this refund, users must only have held their funds in Custody and Withhold accounts and not in the Earn or Borrow accounts.

The latter was Celsius’ main offering, as the company was basically a digital asset lender. In most jurisdictions, it didn’t offer custody and withhold accounts, and users could only open Earn and Borrow accounts. This group, which is the overwhelming majority, will not qualify for the refunds if the court rules in favor of the motion. The hearing is set for October 6.

With the filing, the collapsed lender seems to continue holding onto its assertion that the assets the customers had placed in the Earn program were theirs (Celsius) and not owned by the customers. The lender’s terms and conditions stated that by placing one’s assets in the Earn account, they surrendered these assets to the company.

It’s different from those who only held their assets in the Custody accounts who, from a technical perspective, still have a claim to their assets.

In the motion, Celsius’ lawyers even explicitly stated that the lender “believes that assets in the Earn Program and the Borrow Program are likely property of its estates.” As such, the lender has the authority to take back any money that users transferred from their Earn and Borrow accounts to their Custody and Withhold accounts. It will only spare transfers below $7,575, the legal statutory threshold.

All along, Alex Mashinsky and his team focused on advertising the Earn and Borrow programs as this was their cash cow. According to court documents, as of July 10, the company’s Earn accounts held assets worth $4.2 billion.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups from BitMEX to BinanceBitcoin.comBlockstreamShapeShiftCoinbaseRipple,
EthereumFTX 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.

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