On July 13th, crypto lender Celsius Network Ltd. filed for Chapter 11 bankruptcy and took the market by complete surprise.
Now, the lender is looking into releasing cryptocurrencies worth almost $50 million to custody account holders on its platform.
According to reports, these custody accounts were not involved in the earn and borrow program of the company. A court hearing is scheduled for the matter on October 6th.
Court documents have released that the crypto lender wants to release $50 million of its assets to specific customers.
It is a debtors’ motion, which is aimed at reopening withdrawals for some customers in regard to specific assets that had been part of the custody program in order to grant them some relief.
Before the crypto lending platform had filed for bankruptcy, Celsius Network had first hit a pause on all its withdrawals, transfers and swaps almost a month before on June 12th.
The bankruptcy process of the company has been a rather extensive one and the customers of the lender have also gotten in touch with the court.
They have sent letters in which they begged for the release of their funds, citing financial difficulties. According to one customer, it was about putting food on the table and a roof over the head.
According to one report, Ripple Labs had been interested in the crypto lender and its assets and the company had been asked to comment on the bankruptcy procedure.
Anonymous sources had also revealed in mid-August that Alex Mashinsky, the chief executive of Celsius, had been in charge of the trading scheme and he was the one who made some bad bets.
On August 16th, the bankruptcy court judge had given approval for selling Bitcoin (BTC) that the company had mined previously in order to continue its operations.
At the end of the previous month, Celsius had also initiated a lawsuit against Jason Stone, the founder of Keyfi, as it claimed that millions worth of assets had been stolen from its wallets.
A month earlier, Stone had revealed that he had availed the services of Roche Freedman LLP for taking the crypto lender to court.
Stone said that the best way to resolve the matter was to do it in court, so he had taken legal action against Celsius Network.
According to the filing by Celsius, the funds deposited by custody holders are not considered property of their estate, but this applies to earn and borrow customers.
Therefore, the crypto lender said that the funds in custody asset accounts would be released to any former or current insiders, employees, or affiliates.
The motion that the company filed also disclosed that they were well aware of the kind of reaction they can expect from some customers.
They may not be pleased with the relief given to some custody holders. Not every stakeholder and customer is going to be happy about it because they want to get relief as well.