Last week, crypto service provider firm Prime Trust agreed to return $17 million in assets to bankrupt crypto lending platform Celsius, according to multiple reports, which several experts say is “a drop in the bucket” in light of what Celsius owes its clients.

                By                    Yaёl Bizouati-Kennedy

Celsius filed a lawsuit against Prime Trust in August, alleging that “Prime Trust has failed and refused to transfer to Celsius approximately $17 million worth of crypto assets (at recent prices) that Celsius instructed Prime Trust to deliver,” according to the lawsuit.

The assets include 398 Bitcoin, 196,268 CEL tokens, 3,740 ETH and 2,261,448 USDC, the lawsuit notes.

In June 2021, Prime Trust terminated its relationship with Celsius, which directed the firm to transfer certain crypto assets to Celsius, according to the lawsuit.

“Prime Trust complied in part, transferring crypto assets worth approximately $119 million (at recent prices) to Celsius,” the lawsuit reads. “But Prime Trust has refused to fulfill its obligations to transfer certain other Subject Property as requested by Celsius. Celsius sought for many months to persuade Prime Trust to honor its obligations and transfer identified Subject Property to Celsius. At times, it appeared those efforts were close to being rewarded.”

At a hearing at the U.S. Bankruptcy Court for the Southern District of New York on Oct. 20, Prime Trust agreed to settle and return the assets, which will be held in a separate account, CNBC reported.

Celsius Owes Over $1 Billion

“Look, this is yet another example of the messy unwinding from all the blowups of centralized digital asset lenders that have taken place since the beginning of the year,” said Jae Yang, CEO and founder of Tacen. “This money sent by Prime Trust will somewhat lighten the burden on Celsius as it goes through bankruptcy. But this is a drop in the bucket when it comes to the deficit listed on its balance sheet, which amounted to a staggering $1.19 billion.”

Yang added that, from the 30,000-foot perspective, the issues surrounding Celsius and the other insolvent centralized digital asset lenders should be seen as a rallying call of sorts to focus on the permissionless protocols of decentralized finance, or DeFi, that are far more transparent and auditable.

“While DeFi certainly has its problems,” Yang said, “this facet of the digital asset industry held up pretty darn well during the unwinding process that accelerated at the start of the year. That’s because, again, with DeFi, it’s a lot easier to know in real time who owns what and who owes who what to whom.”

‘A Small Win for Celcius’

On Sept. 27, Celsius CEO Alex Mashinsky announced his resignation.

“I elected to resign my post as CEO of Celsius Network today,” he said in a press release. “Nevertheless, I will continue to maintain my focus on working to help the community unite behind a plan that will provide the best outcome for all creditors, which is what I have been doing since the Company filed for bankruptcy.”

Earlier this month, CoinDesk reported that Mashinsky and Daniel Leon, former chief strategy officer, “withdrew a combined $17 million in crypto from their accounts between May and mid-June, when Celsius halted all user withdrawals.”

Brent Xu, CEO and co-founder of Umee, said the Prime Trust settlement represents “a small win for Celsius that will likely have little impact on repairing its balance sheet.”

“But when dealing with bankruptcies, small wins can be useful,” Xu said. “But Celsius has a long road ahead and it’s doubtful that its issues will be resolved any time soon. This just to show important DeFi is to the digital asset ecosystem: With DeFi, everything is transparent and audible. That wasn’t the case with Celsius and a lot of other centralized lenders, and this is a reason why things got as bad as they did.” 

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