A federal bankruptcy judge ruled cryptocurrencies deposited into interest-bearing accounts at Celsius Network, a now-bankrupt cryptocurrency lending platform, actually belong to the firm – thanks to the fine print.
With the Earn program, Celsius allowed users to deposit cryptocurrencies like bitcoin, ether and tether and receive weekly interest payments. Depending on the time horizon and token, the platform offered as much as 18% interest annually.
Celsius had approximately 600,000 accounts in its Earn program, and the accounts held a collective value of approximately $4.2 billion as of July 10, 2022, the filing noted. About $23 million of that value consisted of stablecoins. But all of that is now property of the estate, aka Celsius, the judge ruled.
Thanks to Celsius’ “unambiguous” terms and conditions, any cryptocurrency assets – including stablecoins – that were deposited into Earn Accounts, became Celsius’s property, the filing stated.
And for those looking to fight the court ruling and get their funds back, it seems unlikely because “there simply will not be enough value available to repay all Account Holders in full,” the filing stated.
With bankruptcy proceedings, priority to receiving frozen funds is often given to secured creditors. But the filing deems account holders with the Earn program as unsecured creditors of Celsius, which means their recovery depends on the distributions to unsecured creditors under a Chapter 11 bankruptcy plan.
“If only some Account Holders prevail with their arguments that they own the cryptocurrency assets in their accounts, they hope to recover 100% of their claims, while most of the Account Holders are left as unsecured creditors and may recover only a small percentage of their claims.”
Bankruptcy judge rules Celsius Network owns users’ interest-bearing crypto accounts by Jacquelyn Melinek originally published on TechCrunch