Judge Martin Glenn has ordered Celsius to return about $44 million worth of crypto to its custody program customers. The United States bankruptcy judge delivered the verbal ruling.
He said,
I want this case to move forward. I want creditors to recover as much as they can as soon as possible."
You would recall that as of 29 August 2022, Celsius, a crypto lender, held about $210 million in custody accounts. However, the judge's ruling reveals that only $44 million of the funds will be classified in the custody program. Therefore only $44 million will have to be refunded to the customers.
At this juncture, it is expedient to identify the digital assets that fall into the custody accounts. Similarly, we shall identify why such funds belong to the lender's customers, not the platform.
In the same judgment, Judge Martin Glenn approved the payment of a $2.8 million key employee retention program (KERP). The program will see the payment of bonuses to employees to keep them in the firm.
Similarly, Simon Dixon tweeted that the KERP employees are currently 170 — still in the process of leaving. You would recall that earlier. The crypto lender had 370 employees, which had now reduced to 170 when about 200 were left.
When Judge Martin Glenn ordered Celsius to return crypto to the platform's custody program customers— the crypto lender said it was just $44 million out of $210 million in its custody. However, investigation shows that it owes creditors billions of digital assets.
The reason for returning such a fraction of the funds in the lender's custody is that they have not been transferred from earned accounts. That is, the funds in the custody program comprise crypto tokens that have never touched the crypto lender's Earn accounts.
Similarly, creditors whose funds have only been held in the custody program are considered pure custody assets. The judge, therefore, ruled that this fund category belongs to customers and not the crypto lender.
Furthermore, Celsius has the Earn account accounts where the crypto lender locked up a large share of customers' funds. More than half of the $4.7 billion user funds are locked in the Earn account. However, the judgment does not cover the funds in the Earn account.
Therefore, customers who engage in the Earn program— where the depositors can earn interest— do not fall under the category of those that the crypto lender will refund unless a new judgment adds them to the criteria.
Similarly, Celsius argued that its customers who deposited funds in its earn program have given up their funds. The crypto lender said its term of service specifies that such funds no longer belong to the customer but to the platform.
Reportedly, Celsius also intends to sell about $18 million of stablecoins. These stablecoins were said to be held in the Earn account and will be used to fund its reorganization.
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