Summary: The U.S. Bankruptcy Court for the Southern District of New York (the court where Celsius filed for bankruptcy earlier this month) has yet to decide what happens if the value of locked creditor's crypto funds will increase, assuming the crypto market will soon recover and digital assets prices will go up. Celsius Network is a ...

The U.S. Bankruptcy Court for the Southern District of New York (the court where Celsius filed for bankruptcy earlier this month) has yet to decide what happens if the value of locked creditor's crypto funds will increase, assuming the crypto market will soon recover and digital assets prices will go up. Celsius Network is a crypto firm that suspended withdrawals for its users in June after reporting a loss of roughly $1.2 billion. 

The hole in their budget was caused by a crypto market crash described by many as a "crypto winter." A month after freezing users' funds, Celsius has filed for chapter 11 bankruptcy in a New York court.

According to Daniel Besikof, a partner at the law firm Loeb & Loeb, if the digital assets locked by Celsius will increase in value along with market recovery, it doesn't necessarily mean that creditors' claims will also increase, as they are denominated in USD (U.S. dollars).

Besikof made an analogy with oil and gas companies that have filed for bankruptcy at the market bottom and later became solvent as oil prices increased. In those cases, creditors' claims were paid in full, and their value did not increase once the oil prices went up. If Daniel Besikof is right or wrong remains to be seen, as this is still uncharted territory for the N.Y. court.

Author: Garrett Meifert