A Bankruptcy Judge in Celsius Ordered The Return of Crypto Assets

A U.S. bankruptcy court ruled on Wednesday that certain Celsius Network clients should have their deposits back, offering relief to a very small number of consumers whose monies were never combined with other Celsius funds.

The United States Bankruptcy Court's Judge Martin Glenn is reviewing broader factors, including who owns crypto assets deposited with Celsius.

According to the official creditors committee of Celsius, Wednesday's ruling 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 attempt to claw them back to repay other customers.

Previously, the creditors committee calculated that $50 million was at stake for custodial account holders.

Judge Glenn has not yet decided on the ownership of the "earn" and "withhold" accounts of Celsius.

Earned accounts, which earned users interest and allowed Celsius to utilize client funds to produce loans, were the default account type at Celsius until regulatory investigations forced the business to change direction in early 2022.

These regulatory probes, which claimed that earned accounts constituted an unregistered marketing of securities, drove Celsius to construct custodial accounts that did not accumulate interest and withhold accounts.

State of New Jersey-based In June, Celsius halted withdrawals, citing "extreme" market conditions, preventing individual investors from accessing their cash. When it filed for Chapter 11 bankruptcy in July, Celsius reported assets of $4.3 billion and liabilities of $5.5 billion, the great bulk of which was owing to its customers.