Celsius Users File Petition To Recover $22.5 Million In Crypto

Celsius appears to be even more trouble, as a group of custodial account holders has petitioned the bankruptcy court to return their assets. Over 60 of these account holders have asked for the monies to be returned outside the procedures, putting additional strain on the financially troubled corporation.

An ad hoc group of 64 Celsius custodial account holders filed a complaint in the United States Bankruptcy Court for the Southern District of New York on August 31 to retrieve their assets.

According to court filings, the creditors are attempting to recoup more than $22.5 million in cryptocurrency assets stored in Celsius’ custody service. Togut, Segal & Segal, a bankruptcy law firm, represents the group.

The plaintiffs argue that users of the custody business should be allowed to recover their monies because they should have been stored in different locations. This contrasts with the payments sought by other creditors from the Earn program. They contend that the company should be able to refund those cash and honor its commitment to repay these creditors.

The main point is that when consumers use the Earn program, they transfer Celsius’s “all rights and title” to digital assets. However, the custody service’s filing notes state:

“Unlike the Earn Program, title to cryptocurrency ‘held in custody shall’ at all times remain with the [user]’ and ‘Celsius will not transfer, sell, loan or otherwise rehypothecate’ digital assets in custody unless ‘specifically instructed by [users], except as required by valid court order, competent regulatory agency, government agency or applicable law.’”

Celsius is one of many crypto lending platforms that have encountered substantial challenges due to the recent bear market and the resulting liquidity issues in the crypto lending sector. The company’s balance sheet has a $1.2 billion hole, with most of its liabilities owed to its customers. In mid-July, Celsius filed for Chapter 11 bankruptcy protection.

In late August, amid continued legal and liquidity issues, Celsius launched a lawsuit against a large U.S. custodian Prime Trust. The firm claimed that Prime Trust failed to repay $17 million in cryptocurrency after it terminated its contract with the lending firm in June 2021.

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