Bankruptcy Court Says Celsius Users Can Begin Withdrawing Funds

A bankruptcy court filing says some customers can withdraw funds from troubled cryptocurrency firm Celsius.

The Tuesday (Jan. 31) filing shows Celsius has the court’s permission to disburse 94% of the assets of the users in question.

This assumes, however, that the users meet specific criteria, such as having sufficient assets in their account to cover withdrawal fees.

“Prior to any withdrawals being processed, Eligible Users will be asked to update their Celsius account with certain required information to process withdrawals including, specific customer information related to Anti-Money Laundering (AML) and Know Your Customer (KYC) information, and information regarding the destination address of the withdrawal,” the filing said.

The filing notes that the court still needs to determine when and if users can withdraw the remaining 6% of their funds.

Celsius Network filed for Chapter 11 bankruptcy in July of last year, soon after freezing customer networks.

As PYMNTS noted at the time, the company had become a major player in crypto lending by offering high returns while suggesting it offered less risk than traditional banks. However, the company got into trouble by offering big yields to crypto depositors while making substantial loans that were backed by insufficient collateral, leaving it vulnerable to a market downturn.

The firm’s troubles have continued since then. A report this week by an independent examiner found that the company used customer deposits and investor money to prop up its token.

“The business model Celsius advertised and sold to its customers was not the business that Celsius actually operated,” wrote Shobay Pillay, the court appointed examiner.

On Twitter Tuesday (Jan. 31), Celsius said it “worked diligently” to provide Pillay with information for her report. The company added that it is working to maximize the value of its estate under the guidance of interim CEO Chris Ferraro.

Last month, the New York attorney general sued Celsius co-founder and former CEO Alex Mashinsky, alleging he made false and misleading statements about the platform’s safety, misrepresented and concealed Celsius’ deteriorating financial condition.

The suit says hundreds of thousands of investors — including 26,000 New Yorkers — were defrauded out of billions of dollars’ worth of cryptocurrency.

“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” New York Attorney General Letitia James said in a news release. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal.”