US Judge Says Celsius Network Owns Most of Customer Crypto Deposits

Jan 4 (Reuters) – A US bankruptcy judge ruled on Wednesday that Celsius Network owns most of the cryptocurrency that customers deposit into its online platform, meaning most Celsius customers could be in line for repayment in the crypto lender’s bankruptcy. Will be in

The decision by US Bankruptcy Judge Martin Glenn in New York affects about 600,000 accounts, which had $4.2 billion in assets when it filed for bankruptcy in July. The company does not have sufficient funds to repay those deposits in full, Glenn wrote.

The ruling means most Celsius customers will have lower priority than customers with non-interest-bearing accounts and other secured creditors. It was not clear whether Celsius has significant secured debt.

The ruling also prevents a battle for higher priority among customers with interest-bearing accounts, to avoid a situation in which some of those customers are repaid 100% of their deposits, while a similarly situated customer receives “only a small amount.” percent” are able to recover. His deposit, according to Glenn. According to Glenn, Celsius’s terms of service make it clear that the crypto lender takes ownership of customer deposits in its interest-earning accounts. This means that Earn customers will be treated as unsecured creditors in a Celsius bankruptcy, and they will be last in line for repayment after Celsius’ high-priority loans are repaid.

Twelve US states and the District of Columbia objected to Celsius’ bid to claim the digital asset. They argued, inter alia, that it was unclear whether customers understood the terms of service and that Celsius was under investigation in several states for violating regulations, which arguably prevented the company from relying on the terms of use. Could have stopped

The ruling doesn’t mean Earn customers will get “nothing” in the bankruptcy case, and it doesn’t prevent further challenges to Celsius’ ownership of crypto deposits, Glenn wrote.

Per the ruling, Celsius customers may be able to bring fraud or breach of contract claims against the crypto lender, and state regulators may be able to make the case that account holders’ contracts are unenforceable because they violated state securities laws. has been violated.

“The Court does not take lightly the consequences of this decision on ordinary individuals, many of whom have accumulated significant savings in the Celsius platform,” Glenn wrote. “During the process of settlement of claims, the creditors shall have every opportunity of being fully heard on the merits of these arguments.”

The ruling authorizes Celsius to sell approximately $18 million worth of the stablecoin that was held in customers’ earning accounts.

In December, Glenn ruled that a relatively small group of customers with various types of Celsius accounts were entitled to receive their deposits back during Celsius’ bankruptcy. The ruling was limited to customers who held non-interest-bearing custody accounts, whose funds were not mixed with other Celsius assets, and whose accounts were too small for Celsius to demand to withdraw them to repay other customers. Of.

The broader question of who owns crypto assets has been key in other crypto bankruptcies, as well as in the cases of crypto lenders Voyager Digital and Blockfi.

Reporting by Dietrich Knauth and Tom Hales in Wilmington, Delaware; Editing by Alexia Garamfalvi

Our Standards: The Thomson Reuters Trust Principles.

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