Bankruptcy Court Approves 72.5% Payout to Celsius Custody Customers
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Bankruptcy Court Approves 72.5% Payout to Celsius Custody Customers

1 year ago

Meanwhile, a new tally of legal cost filings shows that lawyers and advisors in the case have siphoned off $144 million in fees, with plenty of work left to come.

Bankruptcy Court Approves 72.5% Payout to Celsius Custody Customers


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Celsius custody account holders now have a hard offer to get some of their funds back from the bankrupt crypto lender.

While the vast majority of Celsius clients held Earn accounts paying about 20% interest, Custody account holders were simply using Celsius to "safely" store their assets, with no interest.

Judge Martin Glenn of the federal bankruptcy court in the Southern District of New York signed off on a settlement plan that allows Custody account holders to receive a total of 72.5% of their holdings. The payout will come in two parts: half in 30 days and half with the bankruptcy plan's resolution or by the end of the year.

Employees and insiders are not eligible for the settlement.

Custody account holders got a break as Judge Glenn ruled that while 1.7 million Earn customers' funds had become the property of Celsius — despite former CEO Alex Mashinsky's repeated claims to the contrary — and would be divvied up among all claimants, Custody account contents still belonged to their owners.

Avoiding Clawbacks

However, custody customers were broken into two groups: those who had either never used Earn accounts or withdrew the funds into custody more than 90 days before the bankruptcy, and those who pulled funds from Earn into Custody with less than 90 days lead time.

Earlier this month, the first group was allowed to withdraw 100% if they never had Earn accounts, or up to $7,575 — up to 94% of their assets — if the funds had come via Earn.

That cost about $50 million.

These remaining Custody customers within the 90-day window can opt into the settlement, or hold out for 100% later. However, they may be subject to preference claims — meaning clawbacks of their funds into the general pool — as they transferred assets to Custody from Earn within 90 days of the bankruptcy.

That group has about $160 million trapped on the platform.

Gross Legal Fees

On Monday, software engineer Cam Crews, who has been tracking the Celsius case, tweeted out a spreadsheet showing that lawyers and advisors working on the bankruptcy have billed $144 million so far.

There is a $1.2 billion hole in Celsius' coffers, with plenty of work still to do before the case is fully resolved. He tweeted:

"Congratulations to Celsius lawyers and advisors who are on track to have now passed $140M in fees, at the expense of victims left behind by @Mashinsky's despicable $3B fraud."
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