The verdict: The percentage profitable assets are owned by a bankrupt company, not users

A federal bankruptcy judge has ruled that crypto assets held in Celsius Networks’ earning accounts do not belong to the clients. Instead, the money in the interest-bearing accounts belonged to the bankruptcy-based cryptocurrency lending platform.

In a 45-page written decision, Martin Glenn, Chief Justice of the United States for the Southern District of New York, ruled that Celsius is the owner of $4.2 billion in crypto assets. The ruling set an important precedent that platform users do not own their coins when they use certain products and services.

Real estate ownership of money

The Celsius Earn program allowed users to deposit crypto assets like Bitcoin, Ethereum, and Tether and get weekly funds with interest on them. Customers who parked their assets on Celsius’s lending service lost access to that money in June when the company froze withdrawals, due to severe market conditions.

Celsius had 600,000 accounts in its Earn program when it filed for Chapter 11 last summer, giving assets $4.2 billion in assets by July 2022. Stablecoins accounted for nearly $23 million of that total last September. The entire fund involved has now been declared ownership of the property.

Glenn wrote,

The court concluded, based on Celsius’s clear terms of service, and subject to any defenses held, that when cryptocurrency assets (including stablecoins, which are discussed in detail below) were deposited into Earn accounts, the Celsius assets became the property of Celsius; and the cryptocurrency assets became the property of Celsius. The remaining cryptocurrency accounts in earnings on the date of petition belong to the debtor’s bankruptcy estate (“estate”).

Last month, Celsius and its clients locked up clients in court over ownership of escrow crypto assets because they wanted to sell about $18 million worth of stablecoins, the proceeds of which would be used to fund administrative costs in the coming months.

The court’s latest ruling alleged that Celsius had “established a good business case for permitting the sale and thus permitting the sale.” However, the move was opposed by government regulators and the US Trustee’s Office.

objection

While disputing Celsius’ arguments, Earn Program account holders argued that the terms of use of the accounts were “vague” and that ownership of the assets could not be proven without consideration of additional evidence. This included numerous statements from the company’s former CEO, Alex Machinsky.

On the other hand, Judge Glenn argued that the sale of stablecoins would help Celsius fund bankruptcy proceedings while adding that the company quickly withdraws available funds.

The ownership decision comes nearly a month after a bankruptcy judge ordered the embattled company to return $44 million in funds, which were not part of its income-producing accounts, to its clients.

Judgment after verdict: Celsius Earn Assets belongs to a bankrupt company, users are not first seen on CryptoPotato.

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