Celsius, the embattled crypto lender, has been granted access to crypto assets on the platform. This means that the majority of its customers will be among the last to receive reimbursements.
A New York bankruptcy judge ruled on January 4 that Celsius Network owns the majority of the crypto assets deposited by customers on its platform.
The decision is a setback for Celsius users, who are now at the back of the repayment line. When Celsius declares bankruptcy in July 2022, this will affect approximately 600,000 accounts with assets worth $4.2 billion.
The Celsius terms and conditions were used by Bankruptcy Judge Martin Glenn to determine that funds in Earn Accounts were company property.
“Based on Celsius’s unambiguous Terms of Use… the Court concludes that when the cryptocurrency assets were deposited in Earn Accounts, the cryptocurrency assets became Celsius’s property,”
The ruling also stated that any cryptocurrency assets still in the Earn Accounts as of the petition date in July became the property of the debtors’ bankruptcy estates. Furthermore, as of September 2022, the Earn Accounts held approximately $23 million in stablecoins.
Because of the ruling, most Celsius customers will be given less priority than those with non-interest-bearing accounts. It also prevents any squabbles between customers who had interest-bearing accounts over priority.
According to Glenn, Celsius’ terms of service made it clear that the company owned customer deposits into Earn accounts. As a result, in the bankruptcy proceedings, they will be treated as unsecured creditors. As a result, Celsius will pay off its higher-priority debts first, using whatever resources it has available.
“Celsius held “all right and title to such Eligible Digital Assets, including ownership rights” in the cryptocurrency assets (including stablecoins) in the Earn Accounts,” according to the ruling.
According to the ruling, the terms of service, which date back to February 2018, were updated with this clause in April 2022. Almost all account holders had agreed to the updated version.
Glenn also stated that the company does not have enough funds to repay the deposits.
“Equality of distribution is a fundamental principle of the Bankruptcy Code. Simply put, there will not be enough value to repay all Account Holders in full.”
Most customers are left as unsecured creditors, with “only a small percentage of their claims recoverable,” he adds.
BeInCrypto reported in late December that Celsius had received several buyout bids. However, the most recent ruling could change things.
