Celsius’ withdrawal process slowed by overwhelming demand

abdelaziz Fathi

Bankrupt crypto lender Celsius is taking steps to allow certain customers to withdraw their funds. However, some users have reported difficulties in logging in to process their withdrawals, as indicated by posts on various social media platforms.

“Please note that because the Debtors expect to receive a high number of withdrawal requests and are committed to ensuring accurate and safe withdrawals off of their platform, any such withdrawals may not be processed immediately upon request,” Celsius wrote on X.

According to a recent court document, customers who are part of the Custody Program and classified as holding “Class 6A General Custody Claims” and/or “Class 6B Withdrawable Custody Claims” will be eligible to initiate withdrawals from the platform starting today.

These qualifying users will have the opportunity to withdraw 72.5% of their crypto holdings, although this will be subject to transaction fees. This offer, however, excludes customers who previously participated in a custody settlement.

Additionally, customers who voted against the reorganization plan will not be included in this distribution. Instead, their funds will be placed in a segregated wallet and managed by the Litigation Administrator for the next six months.

The scope of this withdrawal process is significant, with roughly 58,300 users classified as holding “custody assets” valued at around $210 million, as per a filing in September.

Celsius, which filed for Chapter 11 bankruptcy in July 2022, announced last week a pivot in its reorganization plan to solely concentrate on Bitcoin mining.

This updated strategy came in response to feedback from the U.S. Securities and Exchange Commission (SEC) regarding the initial reorganization proposal, which included both mining and staking activities.

Hours before Celsius’s announcement, there were reports that the SEC requested additional details about the assets of the firm, signaling regulatory concerns that may have influenced the revised focus of the reorganization. The implementation of the plan was previously entrusted to Fahrenheit Holdings, which encompasses Arrington Capital and U.S. Bitcoin Corp. They had acquired Celsius in May 2023 through a bidding process.

Celsius proposed that the newly focused “Mining NewCo” will be a publicly traded entity in the United States, with ownership stakes going to Celsius customers. This move represents a shift from Celsius’s previous business model, which was heavily scrutinized by the SEC when it filed a lawsuit against the firm and its former CEO, Alex Mashinsky, in July 2023.

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