On December 7, 2022, by verbal order of the Bankruptcy Court Judge in the Celsius Network LLC matter, Judge Martin Glenn, Celsius was so ordered to return $44 Million in customers cryptocurrency that was held in the entities custodial accounts. Any funds that were never transferred to Celsius’s Earn Accounts fall into this category.

This Order comes as a result of an agreement between Celsius stakeholders and Celsius advisors that any funds held exclusively in a Celsius Custody Account belonged to the platform’s users and not the platform itself.

Nonetheless, this $44 Million is but a small part of the billions owed to other Celsius customers as a result of the Bankruptcy filing. Here is where things get a bit tricky. As of September, 2022, Celsius had more than $200 Million in assets but a majority of the coins comprising this $200 Million were moved from Celsius’ Earn Accounts to the Custody Accounts right before the Bankruptcy filing.

As such, these transfers permit Celsius to still claim ownership of the transferred crypto as it was so moved as a preferential transfer. Judge Glenn did not specifically order these transferred coins to be returned. But customers that transferred their assets from interest-bearing accounts to custodial accounts after Celsius’ financial problems went public (for preferential transfers, ninety days prior to the petition’s filing) will only receive $7575 return of capital. Pursuant to papers filed with the Court, only approximately $11 Million may be included for return under this Order.

However, the work in this complex Bankruptcy case is far from finished. Legal treatment for the coins held in Earn Accounts, approximately $4.7 Billion in value, must still be decided by the Court. It is Celsius’ claim that when coin owners deposited into the Earning Accounts they agreed to the Celsius Terms of Service for which they gave up ownership of their coins.

Judge Glenn specifically noted at the hearing:

I want this case to move forward. I want creditors to recover as much as they possibly can as soon as they possibly can.

[Huigsloot, L. Bankruptcy judge orders $44M in crypto to be returned to Celsius customers. (Accessed December 8, 2022)]

INFORMATIONAL SOURCES

• Hill, J. Celsius Judge Orders Return of User Crypto Worth $50 Million.
• Huigsloot, L. Bankruptcy judge orders $44M in crypto to be returned to Celsius customers. (Accessed December 8, 2022).
• McCurdy, W. Bankruptcy Judge Orders Celsius to Return $44M in Cryptocurrencies. (Accessed December 8, 2022).