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Jan 4 (Reuters) – A U.S. bankruptcy judge ruled Wednesday that Celsius Network owns the majority of cryptocurrencies deposited by customers on its online platform. This means that most Celsius customers will be the last to pay back if their crypto lenders go bankrupt.
A ruling by US bankruptcy judge Martin Glenn in New York affected nearly 600,000 accounts that held assets worth $4.2 billion when Celsius filed for bankruptcy in July. The company doesn’t have enough money to fully repay those deposits, Glenn wrote.
This ruling means that most Celsius customers will be given lower priority than customers with interest-free accounts and other secured creditors. It is unclear whether Celsius has any significant secured debt.
The ruling also prevents disputes over higher priority among customers with interest-bearing accounts, with similarly situated customers recovering only a “small percentage” of their deposits, while some of those customers Avoid the situation of paying back 100% of the deposit. According to Glenn, their deposit. According to Glenn, the Celsius terms and conditions made it clear that the cryptocurrency lender has transferred ownership of the customer’s deposit to his interest-bearing Earn account. This means that Earn’s customers will be treated as unsecured creditors in Celsius’ bankruptcy and will be paid last after Celsius has paid off its higher priority debt.
Twelve US states and the District of Columbia opposed Celsius’ claims to digital assets. Among other things, they said it was unclear whether customers understood the terms of service, and Celsius was under investigation in several states for alleged regulatory violations, which definitely makes the company dependent on the terms of service. argued that it could be hindered.
The ruling does not mean that Earn’s customers “get nothing” in the bankruptcy case, nor does it stop further challenges to Celsius’ ownership of cryptocurrency deposits, Glenn wrote. there is
According to the ruling, customers of Celsius may be able to file fraud and breach of contract claims against crypto lenders, and state regulators have ruled that account holders’ contracts have been violated by state securities laws. may be claimed to be unenforceable.
“The court is not downplaying the impact of this ruling on ordinary individuals, many of whom have large savings on the Celsius platform,” Glenn wrote. “Creditors will have every opportunity during the claim resolution process to have a full hearing on the merits of these arguments.”
The ruling allowed Celsius to sell approximately $18 million in stablecoins held in customer acquisition accounts.
In December, Glenn ruled that a relatively small group of customers with various types of Celsius accounts were entitled to recover their deposits in the event of Celsius bankruptcy. Its ruling is that it has an interest-free custody account, the funds are not mixed with other Celsius assets, and the account is too small for Celsius to try to get them back in order to repay other customers. Limited to customers.
The broader question of who owns crypto assets is also a key issue in other crypto bankruptcies, including the cases of crypto lenders Voyager Digital and BlockFi.
Reporting by Dietrich Knaut and Tom Hulls of Wilmington, Delaware.Edited by Alexia Garamfalvi
Our standards: Thomson Reuters Trust Principles.
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