Lawyers from Kirkland and Ellis filed a petition with a court on behalf of Celsius. The document contains a request to provide Celsius with the opportunity to sell stablecoins belonging to the company in order to cover court costs due to increased liquidity. Despite the company’s attempts to stabilize the work, the court proceedings seem to be delayed, because the Celsius case is facing new legal challenges.
As we wrote earlier in August, thanks to their petition, Celsius got the opportunity to sell their bitcoins to cover expenses. Therefore, it is likely that the new petition will also be considered and approved by the court.
In the petition, the lawyers point out that stablecoins are an effective tool for increasing liquidity, which will help the company pay for debtors’ operations. According to the document, the company now owns 11 different stablecoins worth a total of $23 million.
“Celsius currently owns eleven different forms of stablecoin totaling approximately $23 million. The stablecoin is held by Debtor Celsius Network Limited (UK), Debtor Celsius Network LLC (US), and non-Debtor Celsius Network EU UAB (LT).”
Also, Celsius lawyers have demonstrated that the petition to allow trading in stablecoins has legitimate grounds, referring to section 363 of the Bankruptcy Code, which should help firms to continue their activities during court proceedings without undue pressure from judicial authorities.
“Section 363 of the Bankruptcy Code is designed to strike a balance between allowing a business to continue its daily operations without excessive court or creditor oversight and protecting secured creditors and others from dissipation of the estate’s assets.”
This petition will be considered by the court on October 6. Perhaps, stablecoins will really help Celsius to gradually establish its effective work, which will mark the company’s chance to restore its reputation in the eyes of the community.
However, today the community is not positive about what is happening with Celsius, but on the contrary adds fuel to the fire. A group of holders of depository accounts asked the court to return their funds, which are in the “Custody Service”.
“In June 2022, the Debtors froze all withdrawals of cryptocurrency from their platform. Since that date and since the Petition Date, the Debtors have not honoured any withdrawals from any programs, including Custody Service, even though the Custody Assets — by the plain language of the Debtors’ Terms of Use — provide that title to Custody Assets always remains with the user.”
The interests of users are represented by the law firm Togut, Segal & Segal. It seems that users are serious about getting back their crypto assets totalling $22.5 million, which are now frozen by Celsius. Remember that according to the bankruptcy documents provided by Celsius, the total amount of the company’s debt to customers is $4.7 billion. We can say that the $22.5 million that a group of users is trying to reclaim, against this background, seems like an insignificant amount.
It seems that Celsius understands that it is losing the trust of their community, in many ways the situation is aggravated by the fact that people cannot get their funds. To remedy the situation, the company is trying to stay in touch with the community on Twitter at all times. It is showing interest in customer support, and is also going to restructure, which should help alleviate some of their problems.
We are committed to ensuring that similarly situated customers are treated similarly through our reorganization. We’ll continue to keep all customers updated through our official channels as and when appropriate.
— Celsius (@CelsiusNetwork) September 13, 2022
Meanwhile, people on Twitter are comparing the situation with the return of funds to Celsius users with the consequences from the collapse of the Mt.Gox exchange, which stopped working after being hacked in 2014. Only in 2021, a court adopted a plan to compensate users for losses, and more recently (September 14, 2022), the exchange finished accepting applications from users for damages.
If we ever see anything, it will be pennies on the fiat. Mt. Gox victims are only just now seeing the possibility of some compensation, 8 years after bankruptcy was filed.
— Robert Brinson (@ncminuteman) July 14, 2022
Back in 2014, fraudsters brought losses to the exchange estimated at $440–480 million, which in today’s money has approached $17 billion, due to the greatly increased bitcoin prices since then.
People are always worried about their money and strive to get it back as soon as possible. How soon will Celsius users receive their funds? Perhaps it will become clear at the next court sessions, and perhaps this issue will remain unresolved for a long time.
