A US bankruptcy judge has ruled that crypto lender Celsius Network should repay deposits back to customers.
However, the ruling only applies to deposits of those users whose funds were never mixed with other Celsius funds, which means that a small number of consumers will be impacted by the measure.
Judge Martin Glenn said that his ruling would apply to users with non-interest-bearing custody accounts, as those were not commingled with other Celsius assets.
The judge explained that those accounts were too small for Celsius to “claw back” and repay other investors.
The amount for custody account holders is estimated at $50m. However, the judge is yet to make a ruling on how the “earn” and “withhold” accounts should be sorted out. The non-interesting-bearing accounts and earn accounts are intertwined.
Previously, the earn accounts were dubbed as unregistered securities offerings by regulators, which forced Celsius’ hand to introduce the ones that had no interest bearing, along with the withhold accounts.
Celsius hit a major snag in June and froze withdrawals as it ran short on liquidity, citing “severe market conditions” at the time.
A month later, in July, the network filed for bankruptcy, with the company reportedly having $5.5bn in liabilities, which are mostly owed back to customers.
Celsius Network’s collapse presaged that of FTX and was in itself triggered because of the company’s exposure to the Terra Luna crash, which plunged crypto markets into a downward spiral they have not yet recovered form.
Celsius has been grappling with the issue of reimbursing customers since early October at the very least.
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