Celsius Network Lines Requests a Limited-Guest Recession Renewal
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Celsius Network Ltd., which filed for Chapter 11 bankruptcy, has requested the release of $50 million of the total amount held in the Custody Program and Withhold Accounts, which totals $225 million. In addition, the network asked the US Bankruptcy Court for permission to allow consumers to withdraw any digital assets held in certain accounts.
The court records say the request will be fully heard on October 6th. As a result, the action is likely to cause a significant schism among the thousands of customers who suffered due to the company’s insolvency.
According to the company, users who deposited cryptocurrencies intending to receive interest on their holdings gave Celsius ownership of the coins. Users who simply held their assets on the platform technically retained rights to the currencies.
Ongoing Legal Cases involving Celsius Network
More than 60 custodial-account holders of Celsius Network petitioned the court presiding over the cryptocurrency lender’s bankruptcy case to order Celsius to pay them their money outside of the proceedings. Last Wednesday, the ad hoc group petitioned the Bankruptcy Court for the Southern District of New York for a declaratory ruling compelling Celsius to allow withdrawals from custodial accounts.
However, the company’s survival depends on its ability to reorganize its operations and employ revenue from a mining operation still under construction. The organization, according to the petition, is made up of 64 individuals who have at least $22.5 million in cryptocurrencies under Celsius’ care. It is distinct from the Unofficial Committee of Creditors (UCC), another organized group of Celsius consumers.
It is also worth noting that Celsius appears unable to avoid transferring less than $7,575 (the “statutory cap”) when creditors seek it, by Bankruptcy Code section 547(c)(9). Celsius’s lawyers have differentiated between “Pure Custody/Withhold Assets” and “Moved Custody/Withhold Assets,” with “Pure Custody/Withhold Assets” not having been transferred from the Earn or Borrow Programs to arrive at the $50 million figure.
50% Celsius CEL After Celsius Network will Give Customers $50 Million
Celsius Network’s promise to return some of the locked money to its customers increased CEL’s cost by nearly 50%. However, there is a catch: the change will only apply to custody and withhold accounts, as well as custody, means valued at $7 575 or less. However, funds held in accounts that offer borrowing or recurring cryptocurrency earnings are exempt from this power.
At yesterday’s hearing @CelsiusUcc flagged for the Court that the new cash flow forecast no longer shows the need for “DIP” loan financing next month. Take a look for yourself here: pic.twitter.com/pA0XW9sdfb
— Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) September 2, 2022
When Celsius Network filed a motion with the Bankruptcy Court, demanding that its customers with “certain Custody and Withhold accounts” be allowed to withdraw the number of digital assets they owe, the benefits of the network became clear. Celsius saved itself by agreeing to take cryptocurrency deposits from its clients and guaranteeing them attractive returns on their investments via participation in the larger crypto lending market.
After the market crash this year, Celsius was left with a $2.85 billion hole in its balance sheet and was forced to freeze its accounts, locking away billions of dollars in more than a million customer accounts. Celsius initiated Chapter 11 bankruptcy in July.
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