Celsius Wants to Unfreeze $225M in Customer Funds

Bankrupt crypto lending company Celsius is seeking to return customer funds held in its Custody Program and Withhold Accounts, arguing that they do not technically belong to the company itself.

Returning $225 Million 

Some Celsius customers may soon be getting some relief.

In the latest chapter of Celsius’s bankruptcy proceedings, the crypto lending company asked today for the permission of the courts to unfreeze the funds of select customers.

In the filing, Celsius argues that digital assets held in its Custody Program and Withhold Accounts do not actually belong to Celsius by law and that it would subsequently be “fair and appropriate” for customers to be able to withdraw these funds. As of August 29, these assets were worth about $210 million in the Custody Program and $15 million in Withhold Accounts. The former sum is made from the deposits of roughly 58,300 customers and the latter of around 5,680.

A hearing has been set for October 6 at 10:00 EST by the Southern District of New York’s Bankruptcy Court to discuss the matter and possibly authorize the motion.

Celsius is a “CeFi” company, meaning a centralized entity that aims to take advantage of the yield opportunities found in decentralized finance (DeFi) protocols on behalf of its clients. Once one of the crypto industry’s top lending companies, Celsius paused customer withdrawals in June, citing “extreme market conditions.” The firm filed for Chapter 11 bankruptcy a month later, revealing that it was suffering from a $1.2 billion hole in its balance sheet.

The bankruptcy filing led to an outcry from the firm’s customers, some of which claimed on social media to have lost their life savings to the company. The scrutiny brought upon Celsius by its bankruptcy filings further led to reports that the company’s CEO Alex Mashinsky had previously been directionally trading Bitcoin with customer funds against the advice of senior traders at the firm. 

Disclosure: At the time of writing this piece, the author owned ETH and several other cryptocurrencies.