• A federal bankruptcy judge has ruled that crypto-assets deposited in Celsius Network’s „Earn“ accounts do not belong to the customers, instead they belong to the bankrupt cryptocurrency lending platform.
• The verdict has set an important precedent that the platform’s users do not own their coins when using certain products and services.
• The court order is a blow to some users hoping to recover their funds from the company, as the assets in the interest-bearing accounts are now owned by the bankrupt platform.
In a 45 page written decision, Martin Glenn, the Chief US Bankruptcy Judge in the Southern District of New York, ruled that Celsius Network’s ‘Earn’ accounts do not belong to their customers, but instead, to the bankrupt cryptocurrency lending platform. This verdict sets an important precedent that users of certain products and services do not own the coins deposited in their accounts.
Celsius Network’s ‘Earn’ program allowed users to deposit their digital assets so that the platform’s algorithms could generate interest payments for them. As of now, the program holds $4.2 billion worth of crypto-assets.
The court order has been a major blow to many users who were hoping to recover their funds from the company. Judge Glenn determined that Celsius is the rightful owner of the crypto-assets, and that, as such, the funds in the interest-bearing accounts belong to the bankrupt platform.
The decision was made after a legal battle that began when law firm, Kobre & Kim, filed a case against Celsius on behalf of a creditor of the bankrupt platform. The creditor argued that the crypto-assets deposited in Celsius’ ‘Earn’ accounts belonged to the users, and not the platform. However, Judge Glenn rejected this argument and sided with Celsius in the case.
The verdict is the latest development in the bankruptcy proceedings of Celsius Network. The company filed for bankruptcy in April of last year, citing financial distress caused by the COVID-19 pandemic. Since then, the company has been attempting to reorganize its finances and pay back its creditors.
The ruling is likely to have a major impact on the cryptocurrency industry as a whole, as it sets a precedent for how crypto-assets are treated during bankruptcy proceedings. The case has also highlighted the importance of users understanding the terms and conditions of the products or services they are using.
It remains to be seen how the ruling will affect Celsius’ bankruptcy proceedings and the users who have deposited their crypto-assets in Celsius’ ‘Earn’ accounts. For now, however, it appears that the funds in the interest-bearing accounts do not belong to the customers, but instead, to the bankrupt cryptocurrency lending platform.