Celsius to return $48 million of customer funds, major chunk still in question

Bankrupt crypto platform Celsius Network said in a court document filed Wednesday and during a Thursday hearing the firm will give back a small portion of the funds its customers deposited into “custody” accounts held on its platform.

The holdings in these accounts are worth approximately $48 million based on their latest market value.

Celsius' legal team estimates the total amount of crypto held in the firm’s custody accounts is valued between $200-$215 million. That leaves the question of whether the additional ~$160 million or so in customer funds held in Celsius’ custody will be returned.

Though exact values fluctuate with the broader crypto markets, that sum is roughly 5% of the total $4.3 billion in assets Celsius owes customers, and less than 20% of the $1.2 billion gap between assets and liabilities Celsius reported on its balance sheet at the time of its Chapter 11 filing.

“We're not foreclosing the possibility that we'll be back before you seeking to release all of [the custody funds], maybe subject to clawback claims. We're just not there yet,” said Ross Kwasteniet, a partner with Kirkland and Ellis representing Celsius.

Since Celsius filed for bankruptcy on the evening of July 13, the total market capitalization of crypto assets has risen more than 6% to $962 billion from $902 billion as of Thursday afternoon, according to CoinMarketCap.

Celsius logo and representation of cryptocurrencies are seen in this illustration taken, July 7, 2022. REUTERS/Dado Ruvic/Illustrations
Celsius logo and representation of cryptocurrencies are seen in this illustration taken, July 7, 2022. REUTERS/Dado Ruvic/Illustrations

A mid-August court document revealed that Celsius estimates it will run out of funds by October. One course of action the firm may take is selling its assets through a bidding process.

The bidding process is being led by Centerview and the timeline sets the deadline for the final bid on September 21, a bidding auction if necessary on September 23, and a final sale hearing on October 6.

Before then, the unsecured creditors committee plans to take to social media to engage with Celsius customers. It is planning to schedule an Ask Me Anything for sometime in “mid-September,” Gregory Pesce, counsel for the Official Committee of Unsecured Creditors said during the hearing.

While details on bidders remain undisclosed by Celsius, unsecured creditor firm Alameda Research published an early offer the bankrupt firm rejected, and Ripple Labs has expressed interest in some of the debtor firm’s assets.

"The debtors are burning through cash at a rate that is too high and threatens to compromise creditor recoveries in this case, so we're working to find a resolution that will permit a value maximizing exit to chapter 11," Pesce reminded the court.

"The debtor simply can't afford to linger in chapter 11 and it won't be fair for people who have their life savings or college funds, etc. tied up in this case for an extended period of time."

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