The majority of Celsius Network’s clients would be last in line for reimbursement in the crypto lender’s bankruptcy, according to a U.S. bankruptcy judge’s ruling on Wednesday that Celsius Network controls the majority of the bitcoin that users placed into its online platform. About 600,000 accounts that included assets worth $4.2 billion when Celsius filed for bankruptcy in July are impacted by the decision made by U.S. Bankruptcy Judge Martin Glenn in New York.
Significant moment in the Celsius bankruptcy as Judge Martin Glenn rules that $4.2bn of crypto deposited by customers to earn interest belongs to the estate, not the users: https://t.co/8jApMljZZ9 pic.twitter.com/UCoxKBeCbb
— kadhim (＾ｰ^)ノ (@kadhim) January 4, 2023
Glenn said that the corporation does not have the money to completely reimburse such deposits. According to the judgment, non-interest-bearing account holders and other secured creditors would have higher precedence than the majority of Celsius customers. Whether Celsius has a sizable secured debt was unknown.
What does this decision imply to customers?
The decision prevents customers with interest-bearing accounts from bickering among themselves for higher priority, preventing a scenario in which some of those customers receive 100% of their deposits back while other customers in a similar situation only receive “a small percentage.
According to Glenn, Celsius’s terms of service made it apparent that it owned the money that customers deposited into its interest-bearing Earn accounts. Consequently, Earn users will be regarded as unsecured creditors in Celsius’ bankruptcy and would be paid last after Celsius settles bills with greater priority.
Twelve US states and DC have protested Celsius’ attempt to acquire digital assets. They said, among other reasons, that it was uncertain whether clients understood the terms of service and that Celsius was being investigated for rules violations in multiple places, which may plausibly exclude the firm from relying on the conditions of use.
Clients can still hope for something
According to Glenn, the decision does not mean that Earn clients would receive “nothing” in the bankruptcy case and it does not exclude any challenges to Celsius’s ownership of the cryptocurrency deposits.
The decision stipulates that Celsius clients may be able to sue the cryptocurrency lender for fraud or breach of contract, and state authorities may be able to argue that the account holders’ contracts cannot be enforced because they broke state securities rules.
The Court takes seriously the effects of this judgment on common people, many of whom invested large sums of money in the Celsius platform: Glenn composed. During the claims settlement process, creditors will have the chance to have a thorough hearing on the merits of these arguments. Added he
The decision gives Celsius permission to sell almost $18 million worth of stablecoins that were previously kept in consumers’ Earn accounts. Celsius has been experiencing troubles which led them to sell some of their assets.