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Bankruptcy judge orders $44M in crypto to be returned to Celsius customers

December 8, 2022 Coin Telegraph

Bankruptcy judge orders M in crypto to be returned to Celsius customers

Account

The funds are made up crypto held within custody accounts on Celsius that had not been transferred from earn accounts.

A federal judge has ordered crypto lender Celsius to return crypto worth around $44 million to the platform’s custody program customers.

According to Bloomberg, the verbal order was delivered by United States Bankruptcy Judge Martin Glenn in a Dec. 7 hearing, with the judge noting:

“I want this case to move forward. I want creditors to recover as much as they possibly can as soon as they possibly can.”

The amount — which applies only to crypto held within custody accounts — is a tiny fraction of the billions Celsius owes creditors, and the latest decision comes after an agreement was reached between Celsius advisers and stakeholders that crypto deposited in the custody accounts belonged to its users and not the platform.

It is important to note that this order only applies to pure custody assets — those that have never touched Celsius’ Earn accounts and have only ever been held in the custody program.

Celsius held over $210 million in custody accounts as of Aug. 29, but only around $44 million of funds fit within the latest order's criteria.

On the other hand, Celsius' Earn accounts, which are the accounts that enabled depositors to earn interest is where the majority of the $4.7 billion worth of user funds is currently being locked up.

Celsius has argued that users who deposited funds within its earn accounts gave up ownership of the funds when they agreed to the company’s terms of service, and a Dec. 5 Bloomberg report suggests that Celsius is looking to sell $18 million of stablecoins held in these accounts to fund its reorganization with Glenn set to address the issue of fund ownership on Dec. 12.

Meanwhile, on Dec. 5 the lender received approval from the judge for a $2.8 million key employee retention program (KERP) which it filed on Oct. 11.

#CELSIUS HEARING LIVE: KERP is approved. Discussing Celsius Exclusivity now. K&E talking about the Feb 15 compromise. Expanding that the auctions and plan formation are all in coordination with the UCC and they are cognizant of the level of frustration in the community.
— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) December 5, 2022

The bonuses will be payable to select employees, and are intended to ensure its employees remain with the firm so that it may continue its limited business operations.

Celsius employees have been quitting in droves, with only 170 remaining with the firm compared to the 370 it had when it first started the bankruptcy proceedings.

Getting funds out of FTX could take years or even decades: Lawyers

November 21, 2022 Coin Telegraph

Bankruptcy

The complexities that come with digital assets, cross-border insolvency and competing jurisdictions could add years to the timeline.

While investors are eager to know when they will be able to get their funds back from the now-bankrupt crypto exchange FTX, insolvency lawyers warn it could take “decades.”

The crypto exchange, along with 130 affiliates filed for Chapter 11 bankruptcy protection in the United States on Nov. 11.

Insolvency lawyer Stephen Earel, partner at Co Cordis in Australia said it will be an “enormous exercise” in the liquidation process to “realize” the crypto assets then work out how to distribute the funds, with the process potentially taking years, if not “decades.”

This is due to the complexities that come with cross-border insolvency issues and competing jurisdictions, he said.

Earel said unfortunately FTX users are in the queue with everyone else including other creditors, investors and venture capital funders, warning those that have made “crypto to crypto trades” may not see a distribution “for years.”

Simon Dixon, founder of global investment platform BnkToTheFuture who has been an active voice in the Celsius bankruptcy proceedings noted that anyone who holds funds on FTX will become creditors, with a creditors committee to be established to represent their interests.

He stated that the remaining assets will eventually be available to creditors depending on what remains after bankruptcy costs.

These costs could be high given the time required to recover funds, according to Binance Australia CEO, noting that this means more legal and administrative fees that eat into customers' return.

Meanwhile, Digital Assets Lawyer Irina Heaver, Partner at Keystone Law in UAE told Cointelegraph that there are users in the Middle-East also feeling the pain from the FTX collapse, as the region was the third largest user base of FTX.

Heaver explained that as FTX already received a license and regulatory supervision from the newly formed Dubai’s Virtual Assets Authority regulator (VARA), it presents major complications for the regulators as they already have a “huge regulatory failure” on their hands.

Heaver said only “when and if” FTX moves into Chapter 11 bankruptcy procedures, creditors’ rights will be overseen by the legal system, with courts and bankruptcy administrators involved.

Heaver’s advises people with substantial losses due to the FTX collapse to get legal advice and get together with “other injured parties.”

The recent FTX collapse has had significant consequences for investors across the world. It was recently revealed that the bankrupt cryptocurrency exchange may have “more than 1 million creditors.” According to a Reuters article published on Nov. 20 the bankrupt cryptocurrency exchange owes its biggest 50 creditors “nearly $3.1 billion.”

FTX bankruptcy freezes millions worth of crypto company funds

November 16, 2022 Coin Telegraph

bankrupt

Galois Capital, New Huo Technology, and Nestcoin are just some of the crypto firms with funds stuck on FTX as the exchange undertakes bankruptcy filings in the United States.

The collapse of the cryptocurrency exchange FTX continues to have knock-on effects throughout the crypto industry with multiple crypto-focused companies reporting significant amounts of their capital stuck on FTX.

Between Nov. 11 to 14 three crypto companies announced large losses with one of them having to lay off workers to deal with the crisis.

On Nov. 11, crypto hedge fund Galois Capital announced it had “significant funds” stuck on FTX, with a Nov. 12 Financial Times report that said a possible $50 million worth of Galois’ assets were stuck on the exchange.

Other crypto-focused companies have reported their funds arestuck on the now-bankrupt exchange.

New Huo Technology, the owner of the Hong Kong-based crypto platform Hbit Limited announced on Nov. 14 it failed to withdraw $18.1 million worth of cryptocurrency before FTX stopped processing withdrawals.

$13.2 million of this loss are digital assets owned by Hbit users with the company saying it would continue to take steps to “withdraw the cryptocurrency as soon as possible,” bit admitted due to FTX’s bankruptcy filings the crypto “may not [be] able to be withdrawn from FTX.”

According to the announcement, Li Lin, the controlling shareholder of the company and founder of the Huobi crypto exchange agreed to loan up to $14 million to the company for it to use in processing withdrawals. However, the company does not yet know what the financial impact of FTX’s bankruptcy will be if it is never able to withdraw the funds.

Nigerian Web3 startup Nestcoin also announced it failed to withdraw funds from FTX with the company’s CEO, Yele Bademosi, posting to Twitter on Nov. 14 a letter previously shared with investors.

The letter detailed that Nestcoin will lay off workers “as we held our assets (cash and stablecoins) at FTX to manage our operational expenses” and it no longer has the funds to pay some staff.

An update shared with our investors earlier today on the FTX incident and its impact on @Nestcoin. pic.twitter.com/0Mjo4SYF7R
— YB (25,25) ⏳ (@YeleBademosi) November 14, 2022

Previously crypto data aggregator platform CoinGecko warned on Nov. 13 that layoffs across the crypto sector could increase in the coming months when the “full impact” of FTX’s sudden collapse takes effect.

On November 11, FTX said roughly 130 companies in its FTX Group including its United States entity FTX.US and sister trading firm Alameda Research declared they would file for bankruptcy in the U.S. after FTX suffered a liquidity crisis and was unable to process user withdrawals, leaving its customers without access to their funds held on the exchange.

Its Bahamas-based subsidiary, FTX Digital Markets had its assets frozen by the local securities regulator on Nov. 10 and liquidators appointed to safeguard its funds while the bankruptcy proceedings are undertaken.

Crypto exchange Kraken freezes accounts related to FTX and Alameda

November 14, 2022 Coin Telegraph

Coin Telegraph

Kraken said it froze account access to certain funds “we suspect to be associated with ‘fraud, negligence or misconduct’ related to FTX.”

United-States-based cryptocurrency exchange Kraken has frozen the accounts associated with “FTX Group, Alameda Research, and their executives,” on its exchange after engaging with authorities.

In a Twitter post on Nov. 13, Kraken said the accounts were frozen “to protect their creditors” and added it “maintains full reserves” and other users' funds aren’t affected, likely seeking to stamp out fears from users that the exchange might face liquidity issues due to the fund freeze.

Kraken has spoken with law enforcement regarding a handful of accounts owned by the bankrupt FTX Group, Alameda Research and their executives. Those accounts have been frozen to protect their creditors.

Other Kraken clients are not affected. Kraken maintains full reserves.
— Kraken Exchange (@krakenfx) November 13, 2022

A Kraken spokesperson told Cointelegraph that it had “actively monitored recent developments with the FTX estate” and “are in contact with law enforcement” saying it froze account access to certain funds “we suspect to be associated with ‘fraud, negligence or misconduct’ related to FTX.”

“We will resolve each account on a case-by-case basis and may seek guidance from the Bankruptcy Court or trustee as appropriate,” the spokesperson added.

Kraken’s account freeze comes after crypto exchange FTX announced on Nov. 11 that FTX Group consisting of roughly 130 companies including its sister trading firm Alameda Research filed for Chapter 11 bankruptcy in the U.S. with its founder Sam Bankman-Fried resigning as CEO.

It also follows a suspected hack on FTX that involved a Kraken account, Kraken’s chief security officer Nick Percoco said on Nov.12 that they are aware of the account owner's identity and later gave an update that FTX would make a statement regarding the situation “and them utilizing funds from their verified [Kraken] account to complete this transaction.”

Regulators appear to be coming down hard on FTX and their executives amid the recent turmoil.

FTX is headquartered in The Bahamas and the country’s securities regulator on Nov. 10 froze the assets of FTX Digital Markets — the exchanges’ Bahamian subsidiary — and its “related parties."

The Bahamian securities regulator on Nov. 12 denied instructing FTX to prioritize withdrawals of Bahamas-based users after the exchange stated on Nov. 11 that it was instructed by the country’s regulators to facilitate Bahamian withdrawals.

While FTX is now under investigation by the Royal Bahamas Police Force for possible criminal misconduct according to a Nov. 13 report.

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