Celsius Earn customers are considered unsecured creditors
More than $4 billion in cryptocurrencies deposited into so-called “earn accounts” at bankrupt crypto lender Celsius do not belong to the customers who made those deposits, Chief U.S. Bankruptcy Judge Martin Glenn ruled Wednesday.
Instead, according to the ruling, those assets now belong to the Celsius estate.
According to court documents, as of July 10, 2022, there were 600,000 Earn accounts on Celsius valued at an estimated $4.2 billion.
According to Celsius’ terms of service, the company retained “all right and title to such eligible digital assets, including proprietary rights.” Judge Glenn argues that these terms — which the overwhelming majority of Earn customers have agreed to — mean the crypto they deposited in their Earn accounts became Celsius property, not theirs.
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“If the cryptocurrency assets in the Earn accounts are owned by [Celsius]the Account Holders are unsecured creditors and their recovery is contingent on distributions to unsecured creditors under a confirmed Chapter 11 plan or under the priority rules of the Bankruptcy Act in the event of a liquidation,” Glenn wrote in his order.
“A fundamental principle of the insolvency code is equal distribution. There simply won’t be enough value available to fully repay all account holders,” he wrote.
Celsius paused customer payouts in June 2022 citing “extreme market conditions” and filed for bankruptcy the following month.
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