Ruling - Celsius 'Earn' Assets Belong to Lender
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An editor at Coincrop
05 Jan 2023 | 4 min read
Judge's ruling confirmed that crypto platform users do not possess their assets if they have partaken in certain services or products, meaning that even Celsius' 'Earn' Assets may now be claimed by a bankrupt lender. This serves as an important reminder to digital asset owners who are using such platforms - always take the measures necessary to ensure you keep your precious tokens safe and sound!
In a recent court ruling, customers of Celsius's interest-bearing "Earn" product were declared to have forfeited control of their assets to the insolvent crypto lender - meaning they are now considered part of its bankruptcy estate.
On Wednesday, Judge Martin Glenn of the Southern District of New York gave a resounding verdict in his court order that Celsius's terms and conditions clearly stated it had taken possession of digital assets deposited into its Earn product. This judgment signals an unfavourable outcome for investors who were hoping to recover their funds from the company. As reported in July 2022, approximately $4.2 billion worth of various cryptocurrencies were stored within this program with over $23 million being comprised solely by stablecoins.
Moreover, Glenn attested to Celsius having "established a good business reason to permit the sale" Despite objections from state regulators and the U.S. Trustee's office, Celsius was able to sell about $18 million worth of stablecoins which will provide sufficient funds for its administrative costs over the following months.
Glenn wrote "A rare point of agreement among all parties is that the Debtors’ liquidity is precipitously running out,". "The Debtors need to generate liquidity to fund these Chapter 11 cases and continue down the path either of a standalone plan reorganization, a section 363(b) sale, or even a liquidation plan.'
The ruling permitting Celsius to preserve its control over the funds in its Earn account will have long-lasting effects on cryptocurrency investors who use similar products from other platforms, some of which have also encountered bankruptcy in recent times.
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