Crypto News

According to US judge, Celsius Network owns the most crypto deposits from customers

By Dietrich Knauth

(Reuters) – A US bankruptcy judge ruled on Wednesday that Celsius Network most of the cryptocurrency that customers have deposited on its online platform, meaning most Celsius customers will be last in line for repayment if the crypto lender goes bankrupt.

The ruling by US bankruptcy judge Martin Glenn in New York affects some 600,000 accounts holding $4.2 billion in assets when Celsius filed for bankruptcy in July. The company does not have enough cash to fully repay those deposits, Glenn wrote.

The ruling means most Celsius customers are given lower priority than customers who had non-interest-bearing accounts and other secured creditors. It was unclear whether Celsius has significant secured debt.

The ruling also prevents contention for higher priority among customers with interest-bearing accounts, avoiding a situation where some of those customers will recover 100% of their deposits, while customers in similar situations can recover “only a small percentage” of their deposits, according to Glenn . Celsius’ terms of service made it clear that the crypto lender took ownership of customer deposits in its interest-bearing Earn accounts, according to Glenn. This means that if Celsius goes bankrupt, Earn customers will be treated as unsecured creditors and will be last in line for repayment after Celsius repays higher-priority debt.

Twelve U.S. states and the District of Columbia objected to Celsius’ offer to claim the digital assets. They argued, among other things, that it was unclear whether customers understood the terms of use and that Celsius was under investigation in several states for violating regulations, which may prevent the company from invoking the terms of use.

The ruling does not mean that Earn customers will get “nothing” in the event of bankruptcy, and it does not stop further challenges to Celsius’ ownership of the crypto deposits, Glenn wrote.

Celsius customers may be able to assert claims of fraud or breach of contract against the crypto lender, and state regulators may claim that account holders’ contracts cannot be enforced because they violated state securities laws, according to the ruling.

“The Court does not take lightly the implications of this decision for ordinary individuals, many of whom have contributed significant savings to the Celsius platform,” Glenn wrote. “Creditors will have every opportunity to have a full hearing on the merits of these arguments during the claims settlement process.”

The ruling authorizes Celsius to sell approximately $18 million worth of stablecoins held in customers’ Earn accounts.

In December, Glenn ruled that a relatively small group of customers with different types of Celsius accounts were entitled to their deposits during Celsius’ bankruptcy. This judgment was limited to customers who had non-interest-bearing deposit accounts, whose funds were not commingled with other Celsius assets, and whose accounts were too small for Celsius to attempt to reclaim to repay other customers.

The broader question of who owns crypto assets is also crucial in other crypto bankruptcies, including the cases of crypto lenders Voyager Digital and BlockFi.

(Reporting by Dietrich Knauth and Tom Hals in Wilmington, Delaware; Editing by Alexia Garamfalvi)

Source: Crypto News Deutsch

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button