Holders of accounts amount to 4% of the total funds held by the bankrupt crypto lender.
Customers of the bankrupt trading and lending platform Celsius Network have banded together to retain legal representation to recover the Bitcoin kept in the firm’s custody accounts.
Custody claimants who hired Kyle J. Ortiz, a partner at the corporate restructuring firm Togut, Segal & Segal LLP, are claiming an estimated $180 million, or roughly 4% of the total assets locked in Celsius. In the weeks following the initial bankruptcy hearing, this ad hoc group has amassed more than 300 members and raised about $100,000, the fee for its legal representation.
At this time, we have commitments from everyone in the range of $93,000 to $100,000. David Little, one of the leaders of the ad hoc group responsible for managing the custody account, expressed confidence in the group’s eventual success in private communication. “In a couple of days, we went from a handful of people to around 400, and we’ve raised over $100,000 with basically a group of competent strangers,” the authors write.
Celsius was Stored rather than Invested
Those who have interests in a matter and are willing to pay for their representation form an ad hoc group. Custody clients of Celsius did not earn interest on their deposits like clients who used the company’s high-yield Earn product did. Celsius was utilised for storing rather than investing. Users of Earn appear to have signed away rights to their crypto assets, per the company’s terms of service, in contrast to wallet holders, who retain title to their holdings.
When Celsius, which froze client accounts in June due to a $1.2 billion hole in its balance sheet, filed for bankruptcy protection this month, it opened the door for a dispute among various claimant classes, including common customers, significant institutional creditors, and equity holders.
The individuals who had custody of the electronic wallets were the first to band together in an informal capacity. Thomas Braziel, CEO of bankruptcy claims specialist 507 Capital, argues that creditors are concerned that Celsius’ law firm, Kirkland & Ellis, is simply telling them what they want to hear without actually helping them. To get their money back in fiat currency, Kirkland may have filed a lawsuit, just like bankrupt crypto lender Voyager Digital did with the bank that held their assets.
Rather than filing a motion to restore the assets, “Kirkland stated they were going to file a ‘declaratory judgment’ for the court to decide what to do,” Braziel claimed in an interview. People who have filed claims are hearing that these are just empty words. The assets’ whereabouts remain unclear at this time. Celsius claims that they will keep it for you, however, the language in the fine print is vague. Why give it to them if we don’t have to is Kirkland’s line of thinking.
No immediate comment was forthcoming from Celsius, Ortiz, or Kirkland.
