Martin Glenn, a United States bankruptcy judge, has granted some relief to Celsius Network’s custody account holders by ruling that the embattled firm must return crypto assets worth $50 million to them.
According to reports from Bloomberg, the ruling was passed verbally during a court hearing on Celsius bankruptcy proceedings pertaining to a large amount of crypto worth $44 million in September. The ruling is however only applicable to customers with non-bearing interest accounts.
The report also stated that the amount of crypto assets that are supposed to be returned to Celsius custody account holders represents only a small portion of the billions of dollars that Celsius owes its customers.
The judge’s ruling was made after Celsius’s advisers and other stakeholders came to the realization that assets placed in custody accounts belong to the customers and not to the insolvent company because they are only acting as storage keepers.
Celsius had earlier filed for bankruptcy protection in July after placing restrictions on customers’ withdrawals due to liquidity issues.
The report also revealed that Celsius Network had approximately $200 million worth of crypto assets in users’ custody accounts as of September, although most of the assets were transferred from custody accounts bearing interests shortly before Celsius filed for bankruptcy.
The Fall of Celsius Network
The crypto lender initiated bankruptcy proceedings after a month of battling with liquidity issues.
Celsius first began demonstrating signs of instability when it gave an announcement in April that its U.S. arm will start holding non-accreditors’ tokens in custody. As a result, investors were restricted from adding new assets and earning rewards on Celsius’ Earn platform paused.
The collapse of stablecoins LUNA and TerraUST in May also contributed to the fall of Celsius because it caused a lack of confidence in the crypto market, hastening the crypto winter and resulting in massive withdrawals from Celsius users.
A month after halting user withdrawals and transfers, Celsius announced the layoff of a quarter of its personnel due to growing financial concerns according to a report from Calcalist. The report also added that Celsius has employed restructuring consultants and attorneys to effect organizational changes in the firm.
Most recently, Celsius made an announcement according to a report from Insidecrypto that it has been granted permission by the court to extend its exclusivity period to submit a Chapter 11 plan of reorganization. Celsius Network is one of many embattled firms that is currently undergoing bankruptcy proceedings.
