Celsius Network shouldn't Reopen Custody Withdrawals:- U.S. Trustee

On July 13, Celsius Network Filed bankruptcy under Chapter 11 under bankruptcy rules.
In September, Celsius filed a plea in the court to use its Custody Withdrawals to clear its debts.

Celsius Network is a crypto lender that filed its bankruptcy in July under Chapter 11 of bankruptcy laws in the Court of New York. The firm filed its bankruptcy at the time of a volatile crypto market. In an official statement, the company mentioned that “extreme market conditions” are responsible for taking this step.

A US trustee at the Justice Department opposed Celsius’s Plan to reopen withdrawals, reasoning that a comprehensive investigation is still to be completed before any funds can be disbursed.

A US trustee reporting to the Justice Department has argued in court that Celsius should not be allowed to initiate customer withdrawals pending a more comprehensive investigation.

On 1 September, Saturday, Celsius authorised the release of $225 million in its custody program and withdrew the account. Now that request has been forwarded to the U.S Department of Justice, The trustee is facing Opposition from a program member.

U.S Trustee William K. Harrington in a court filing on 30 September, opposed the Plan to “reopen withdrawals in respect to certain assets for certain customers” and to freeze accounts.

Harrington describes Celsius’s Plan to release those funds “prematurely.” He said the firm’s request would “impulsively distribute” the funds without fully understanding its crypto holding and inter-account crypto transfer. It will also overlook the relationship between a company balance sheet and cryptocurrency deposited by creditors.

Harrington Highlighted that Celsius should not release the funds until an examiner report has been filed. The Examiner’s report will provide a detailed summary of whether the company merged funds and why its accounts offering were changed in April 2022.

Harrington reasoned that it is impossible to figure out how many creditors should be paid, Which crypto assets are owed, and how much is owed.

He also alerted that the allocation of funds “could inadvertently affect or limit distribution to other creditors.”

On 30 September 2022, TheCoinRepublic reported that on 29 September 2022, the Texas Department of Banking and the Vermont Department of Financial Regulation filed their objection. Celsius wants to sell the stablecoin holdings to support its finances in the middle of the ongoing bankruptcy proceedings.

They point toward the Celsius request that doesn’t detail how the firm would use the funds. Hence “creates the risk will resume operating in violation of state law.”

The filing mentions the collaborative investigation among 40 state regulators into Celsius’ activities like potential unregistered activity, fraud, and market manipulation.

Thousands of Celsius customers are gathering on social media apps like Telegram and Reddit to analyse legal filings, pool funds to pay for lawyers and make YouTube summaries of developments at court hearings.

While some investors read up on U.S. bankruptcy law, give translations for non-English speakers, and try to engineer their white-knight rescue deals.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing