ON JULY 18TH CELSIUS STOOD BY ITS DECISION OF FREEZING WITHDRAWALS IN BANKRUPTCY HEARING

The cryptocurrency lender Celsius made an effort to assuage customers’ unhappiness about the hold on account withdrawals. Still, it made clear that it has no immediate plans to release its money. At the same time, it works to weather the decline in digital currencies and create a repayment strategy.

Celsius lawyers defended the decision to restrict withdrawals last month during the company’s first appearance in bankruptcy court on July 18. They said that it was necessary to protect clients’ financial interests as users departed and crypto assets dropped off.

According to Celsius attorney Patrick Nash Jr., “The halt was necessary to preserve the assets that the company has so they can be…equitably dispersed to all of the platform’s clients.”

Judge Martin Glenn of the US Bankruptcy Court in New York expressed worry that the ongoing volatility would hamper the company’s restructuring in the cryptocurrency market. According to court documents, the judge also questioned customer funds held in custody accounts, which account for around 4% of Celsius’ deposits, or $180 million, on behalf of nearly 58,000 users.
Whether that money is “really a custodial account, truly in-trust,” as Nash put it, is a matter of legal debate. According to Nash, custody money is separate. Therefore, it will continue to be kept in a traceable account until the legal issue is resolved in bankruptcy court.

The hearing on July 18 was to facilitate Celsius’s admission into Chapter 11, where customers constitute the leading creditor group. According to court documents, Celsius has no financed debt.

The company is experiencing customer backlash due to its move to suspend withdrawals last month, Celsius lawyers stated during the court. According to Nash, customers who left money on the platform would have been left “carrying the bag” if withdrawals had proceeded since the bank was under attack.

CEO Alex Mashinsky revealed a nearly $1.2 billion shortfall in the company’s balance sheet in court documents last week. According to the crypto lender, the majority of Celsius’s $5.5 billion in total liabilities, or more than $4.7 billion, are reported to be owed to users.

Celsius testified in court that the value of its assets decreased by around $17.8 billion since March 30, from $22.1 billion to $4.3 billion.

Nash stated on July 18 that no new customer accounts are being created. According to court records, Celsius also said that it no longer issues margin calls or liquidates collateral to pay off loans.

Next month, Celsius will make another appearance in bankruptcy court.