After the United States Bankruptcy Court for the Southern District of New York granted the firm’s motion, Celsius Network customers have until January 3, 2023, to submit their claims against the defunct digital asset lender.
This week, the bankruptcy court approved our motion to set the bar date, which is the deadline for all customers to file a claim. The bar date has been set for January 3, 2023.
— Celsius (@CelsiusNetwork) November 20, 2022
Celsius advised its clients to anticipate getting a notice via email or regular mail outlining the deadline and the next steps in the procedure. Additionally, the business will use its app to send notifications.
Customers who accept Celsius’ scheduling of their claims as recorded in the Schedules of Assets and Liabilities don’t need to submit a proof of claim, and there is currently no need for them to take any more action about such claims, the business said.
The bankruptcy case’s next significant date is December 5, 2022, when a hearing will take place. The focus of the conversation will be on withhold and custody accounts.
In June, Celsius stopped allowing withdrawals following its reckless wagers on initiatives like.
Celsius was lax with its custody program, the examiner finds
The new developments come at a time when a new report has revealed that negligence in handling the Withhold and Custody accounts played a big part in the company’s downfall.
The report was released by the independent examiner appointed by the Department of Justice trustee, William Harrington, to probe the “credible allegations of incompetence and gross mismanagement” at Celsius.
As reported by Bloomberg, shortfalls in handling two of the lender’s accounts—Withhold and Custody—played a big part in the company’s implosion. The two accounts allowed users to deposit their assets with Celsius while maintaining control.
According to the examiner’s preliminary report, Celsius launched the two programs without “sufficient accounting and operational controls or technical infrastructure.” By June 10, Custody wallets were reportedly overfunded, but two weeks later, on June 24, there was a $50.5 million shortfall. The examiner further claimed that the company sped up the rollout of its Custody wallet program due to pressure from New Jersey regulators.
With Withhold wallets, Celsius didn’t make any effort to segregate or even separately identify users’ assets, examiner Shoba Pillay noted in her report.
“As a result, customers now face uncertainty regarding which assets, if any, belonged to them as of the bankruptcy filing,” Pillay found.
Celsius has previously filed a motion to refund at least $50 million trapped in its accounts, but only to Withhold and Custody account holders. This would exclude users whose money was in its Earn and Borrow accounts, yet the two were its primary offerings. Withhold and Custody accounts were only available in select jurisdictions, while Earn and Borrow were universally available.
The filing didn’t go down well with most of its users.
So because I had my crypto in an earn account (your main feature) and was lending it so you could make money off of it, I get nothing back?
— Camille Johnson (@OffbeatLook) September 1, 2022
Since its collapse, Celsius has held that users who placed their assets in its Earn and Borrow accounts forfeited any ownership of these assets.
In one motion, its lawyers pointed out that the company believes “that assets in the Earn Program and the Borrow Program are likely property of its estates.”
While the wider Celsius community is in an uproar over the move, Custody and Withholding customers fully support the lender’s attempt to pay them out first. Custody account holders have hired Kyle Ortiz, partner at Togut, Segal & Segal LLP, to represent them. Deborah Kovsky-Apap, the partner at Troutman Pepper, is representing the Withhold account holders.
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