After much awaiting the recent judge’s ruling has cleared that Celsius “Earn” Account Funds Belong to Estate, Not Users.
U.S. Bankruptcy Judge Martin Glenn in the Southern District of New York has said on the Wednesday hearing with Celcius that the Digital Assets deposited in the Celius Network “Earn” program belongs to the bankrupt company’s estate instead of the individual users.
According to the July 2022 data Celsius is holding around $4.2 Billion worth of cryptocurrencies in its Earn product. And out of that $23 Million are in the stablecoins. On this, the court has also permitted Celsius to use $18 million worth of stablecoins to fund their administrative expenses.
Judge Glenn wrote
“Earn Assets in Earn Accounts constitute property of the Estates, and that the Debtors may sell stablecoins outside of the ordinary course of business.”
Users who took part in the firm’s lending program were earlier informed that they could earn interest on cryptocurrency deposits made with the company, but they lost access to their money in June when Celsius stopped allowing withdrawals on its platform due to “extreme market conditions.”
Due to the fact that customers who used the service are now unsecured creditors and “may recover just a small percentage of their claims.” Today’s decision will probably prohibit them from receiving the full sum they deposited. The ruling cited the terms of use for Celsius’ loan business, which stated that the company retained “every right and title to such Eligible Digital Assets, including ownership rights.”
Account holder’s objection to the decision of “Celsius “Earn” Account Funds Belong to Estate, Not Users”
According to the holder’s argument, the terms and conditions for the Earn were ambiguous. And the assets’ ownership should not be concluded without considering additional evidence. The statement passed by former company Chief Executive Alex Mashinksy is one of them.
Alex once commented that the account holders have ownership of the assets in the Earn account. Some holders believe that Celsius has breached its own contract and have failed to uphold its fiduciary duties. The statement in the letter read, “A rare point of agreement among all parties is that the Debtors’ liquidity is quickly running out.” “To finance these Chapter 11 cases, the Debtors must create liquidity.”
Judge Glenn mandated last month that the defunct cryptocurrency lender repay $44 million in cryptocurrency to clients who had deposited money in the company’s Custody and Withheld accounts.
Glenn Wrote
“The issue of ownership of the assets in the Earn Accounts is a contract law issue. The Debtors and Committee argue that the cryptocurrency assets deposited in Earn Accounts were owned by the Debtors and are now the property of the Estates. Many Earn account holders (‘Account Holders’) argue that the Account Holders, rather than Celsius, own the cryptocurrency assets in the Earn Accounts and that cryptocurrency assets should promptly be returned to them.”
Final Thought
The Celcius showed the first sign of today’s situation on 12 April 2022. At that time it announced that its American platform will start holding non-accredited investors’ coins in custody. As a result, investors won’t be allowed to continue adding new assets or earning rewards on Celsius’ Earn platform. By 13 July celsius ended up filing for chapter 11 bankruptcy. The users had the hope of recovering their investment from the available fund has crushed by the recent hearing.
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