Celsius Bankruptcy Ruling: A Step Towards Asset Recovery for Customers

Judge's Ruling on Celsius Network

A U.S. bankruptcy judge has ruled that some customers of the crypto lender Celsius Network are entitled to recover their deposits. This decision provides relief to a specific group of customers whose accounts were kept separate from other funds. The ruling applies to those with non-interest bearing custody accounts that were not mixed with Celsius' other assets. These accounts were also too small for the company to pursue in efforts to repay other creditors.

Ownership of Crypto Assets

The judge's decision is part of a broader examination of the ownership of crypto assets deposited with Celsius. However, this latest ruling is confined to custody account holders, with an estimated $50 million at stake. The court has yet to address the ownership status of Celsius' "earn" and "withhold" accounts.

Background on Celsius Accounts

Celsius Network originally offered "earn" accounts, which provided interest and enabled the company to lend customer funds. Regulatory investigations later led to the introduction of custody and withhold accounts, as "earn" accounts were deemed an unregistered securities offering. Celsius subsequently froze withdrawals in June amid "extreme" market conditions, which impacted individual investor savings significantly.

Financial Troubles and Bankruptcy

When Celsius filed for Chapter 11 bankruptcy in July, it reported assets totaling $4.3 billion against $5.5 billion in liabilities. The majority of these liabilities are owed to customers, highlighting the financial challenges the company faces in its restructuring efforts. The recent court ruling represents a significant development for affected customers, although many issues remain unresolved.