A group of Celsius Network custody wallet customers is suing the bankrupt lending platform in an effort to reclaim more than $22.5 million worth of funds.
In a new lawsuit filed on Wednesday, individual holders of more than 64 accounts with Celsius say they retained the title to all of their crypto assets held in the firm’s custody wallets and therefore are entitled to their return.
The account holders argue that Celsius cannot use their funds to pay off bankruptcy debts.
“In April 2022, the debtors [Celsius] created a self-titled ‘custody service’ where users entrusted their cryptocurrency to the debtors in a ‘custody wallet’ but retained title to such assets…
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 honored 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.”
On Thursday, Celsius filed a motion with the same bankruptcy court seeking authority to permit certain customers to withdraw their cryptocurrency from their custody program. A hearing on the motion is scheduled for October 6th.
Celsius Network initially filed for bankruptcy back in mid-July, just weeks after it halted all customer transactions and withdrawals, blaming extreme market volatility.
The project’s native token CEL briefly collapsed from around $0.90 to as low as $0.09. It has currently mounted a recovery and is changing hands for $1.41 at time of writing.
Since the bankruptcy, the centralized finance firm has also been slapped with a class action lawsuit alleging it operated as a Ponzi scheme.
Furthermore, California’s Department of Financial Protection and Innovation issued Celsius a desist and refrain order over claims that the company violated the local Corporation Code.
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