Lender Celsius Network has acquired the rights to crypto assets on the platform. This means that most of your customers will be the last to receive a refund.
On January 4, a New York bankruptcy judge ruled that Celsius Network owns the majority of crypto assets deposited by customers on its platform.
The move comes as a blow to Celsius users, who are now at the back of the payment queue. This will affect about 600,000 accounts with an estimated $4.2 billion in assets when Celsius files for bankruptcy in July 2022.
Bankruptcy Judge Martin Glenn used Celsius’ terms and conditions to determine this Earn Accounts funds were owned by the company:
Hit Celsius customers
The decision added that the remaining cryptocurrencies in the Earn Accounts became the property of the debtors’ bankruptcy estate as of the date of the July petition. Besides, Earn Accounts had about $23 million stable coins As of September 2022.
The decision means most Celsius customers will have a lower priority than those with interest-free accounts. It also prevents any priority disputes between customers who had interest bearing accounts.
According to Glenn, Celsius’ terms of service made that clear the company took ownership of customer deposits in their Earn Accounts. Therefore, they will be treated as unsecured creditors in bankruptcy proceedings.
As a result, Celsius will pay off your most pressing debts first with what you have. The decision stated:
“Celsius had ‘all rights and title to such Eligible Digital Assets, including ownership rights’ to the cryptocurrency assets (including stablecoins) in Earn Accounts.”
The decision states that the terms of service, which originally dated from February 2018, were updated with this clause in April 2022. Almost everyone carriers accounts have accepted the updated version.
Insufficient funds for refund
Glenn also wrote that the company does not have enough money to pay those deposits.
“The fundamental principle of the Bankruptcy Code is equal distribution. There simply will not be enough value available to pay all Account Holders in full.”
Most customers remain as unsecured creditors and “can recover only a small percentage of their claims,” he added.
In late December, BeInCrypto reported that it had received several offers to buy Celsius. However, this latest decision could change things.
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