- US Bankruptcy Court recognized Celsius as the rightful owner of all crypto assets deposited on its Earn program.
- Due to the ruling, the Earn platform users won’t receive priority in the upcoming repayment plans.
- The judge, however, ordered that every customer on the Earn program receives the same priority.
- Amidst the financial crisis, Celsius halted withdrawals and deposits on its network and filed for Chapter 11 bankruptcy.
On Dec. 4, the U.S. Bankruptcy Court in the Southern District of New York affirmed Celsius, a troubled crypto lender, as the rightful owner of all crypto assets deposited on its Earn program by customers. According to a 45-page document by the court, the total amount of the deposited funds in the program equals $4.2 billion in cryptocurrency.
Bankruptcy judge Martin Glenn has ruled that Celsius’s Earn program took possession of customer deposits according to its terms of service. As a result, 600,000 users of the program are considered unsecured creditors, and they won’t get the utmost priority in the imminent repayment plans by the crypto lender.
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This ruling infers that Celsius has no financial capacity to fully repay its debt at once, thus mandating the need to set priorities. Now, it is certain that users who held non-interest-bearing accounts and secured creditors will be considered first before those on the Earn program.
However, the judge also ordered that the same priority be given to every customer on the Earn program, warning the crypto lender to avoid repaying a larger amount to a customer and a lesser amount to another customer in the same program.
Celsius’ Earn program is interest-driven. The program lets users earn weekly interest gains on their deposited assets with at least 18% interest on their assets.
Side Notes on Celsius and its Embattlement
In the wake of its financial crisis, the crypto lender filed for Chapter 11 bankruptcy. Before doing so, Celsius had halted withdrawals and deposits on its network earlier.
The filing before the United States Bankruptcy Court revealed that it owes about $4.7 billion, possesses liabilities of $5.5 billion, and assets of $4.2 billion. The lender added that it has $167 million in cash to provide ample liquidity in supporting its operations during the restructuring process.
Meanwhile, last September, the court approved the appointment of an independent examiner to probe the business of the embattled crypto lender. Ever since, the examiner has been investigating Celsius’ digital assets, tax payment procedures, and the current situation of its mining business.
On the Flipside
- The filing states that there are insufficient funds with Celsius to repay all account holders in full, which means those who appeal the court ruling may not receive their funds back.
Why You Should Care
Since last month, Celsius has had a court battle with customers over ownership of money deposited in Earn accounts. It wanted to sell $23 million of stablecoins to fund its operations. With the court ruling, Celsius can now sell those assets. For crypto investors, this verdict could set a benchmark for what a platform’s terms of service mean.
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