Judge rules Celsius “Earn” assets belong to the company, not creditors

A federal judge has ruled that the “Earn” assets belonging to bankrupt cryptocurrency lender Celsius belong to the company, rather than its customers.

On Wednesday, Chief U.S. Bankruptcy Judge Martin Glenn of the Southern District of New York ruled that Celsius’s terms of service made it clear that the company took possession of cryptocurrency assets deposited into its Earn product. As of July 2022, Celsius held approximately $4.2 billion in various cryptocurrencies in its Earn product, with $23 million of that being in stable coins.

The Court’s Verdict

The court has stated that cryptocurrency firm Celsius can retain control over the assets in its “Earn” accounts, despite some account holders arguing that they, rather than Celsius, owned the assets in question. The judge called Celsius’s terms of service “unambiguous” and denied the account holders’ claims that the company had breached its contract or failed to uphold its fiduciary duties. The court will hold a hearing on January 10, 2023 to discuss the submission deadline for claims from Celsius creditors. The ruling has implications for investors using similar products on other platforms, some of which have also entered bankruptcy in recent months. The proceeds from the sale of $18 million worth of stable coins, which state regulators and the US Trustee’s office had opposed, will fund Celsius’s administrative costs for the next few months.

The ruling, which was made in a U.S. bankruptcy court, is a blow to many of Celsius’s customers who were hoping to recover some of their losses after the company filed for bankruptcy in 2020.

Celsius, which was once one of the most popular cryptocurrency lending platforms, collapsed amid a wave of defaults and legal issues. The company’s founder, Alex Mashinksy, has been accused of fraud and mismanagement by customers and regulators.The Earn assets in question were a type of cryptocurrency-based savings account that was offered to Celsius customers. These assets were supposed to be held in a trust for the benefit of the customers, but the judge ruled that they actually belong to the company.

This means that Celsius’s creditors, rather than its customers, will be able to claim a share of the Earn assets as part of the bankruptcy proceedings. It is not yet clear how much these assets are worth, or how much of a payout customers can expect to receive.

The ruling has been met with disappointment and frustration by many of Celsius’s former customers, who had hoped to recoup some of their losses through the Earn assets. It remains to be seen how the bankruptcy proceedings will play out and what the ultimate outcome will be for the company and its customers.

This news comes in just a day after SBF pleaded not guilty in the US courts.

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