Celsius bankruptcy judge orders return of some crypto assets to customers

A US bankruptcy judge on Wednesday ruled that some customers of crypto lender Celsius Network should receive their deposits back, giving relief to a relatively small group of customers whose deposits were never commingled with other Celsius funds.

US Bankruptcy Judge Martin Glenn is weighing broader questions of who owns crypto assets that were deposited with Celsius.

His ruling Wednesday was limited to customers who had non-interest bearing custody accounts, whose funds were not commingled with other Celsius assets, and whose accounts were too small for Celsius to seek to claw them back to repay other customers, according to Celsius’ official creditors committee.

The creditors committee previously estimated that amount at stake for custody account holders was $50 million.

Judge Glenn has not yet ruled on ownership of Celsius “earn” accounts or “withhold” accounts.

Earn accounts, which paid interest to customers and allowed Celsius to use customer funds to make loans were the default account type at Celsius before regulatory investigations forced it to change course early in 2022.

Those regulatory investigations, which alleged that earn accounts were an unregistered securities offering, caused Celsius to create non-interest bearing custody accounts and withhold accounts.

New Jersey-based Celsius froze withdrawals in June, citing “extreme” market conditions, cutting off access to savings for individual investors. When it filed for Chapter 11 bankruptcy in July, Celsius reported $4.3 billion in assets and $5.5 billion in liabilities, primarily owed to its customers.