Celsius: Customer deposits belong to crypto lenders – money gone?
Bad news in the case of insolvent crypto lender Celsius. A US judge is now deciding: users of the service voluntarily surrendered the ownership rights to their cryptocurrencies. What does this mean for users of the service?
Crypto Lender retains customer deposits from the Earn Program
Crypto Lender Celsius Network Collapses In Summer 2022. The Impact of the Bear Market Was Too Heavy. The company used the loans from its customers, among other things, to conduct risky crypto trading.
During the falling prices, Celsius makes a mess and eventually stops paying out. A short time later , Celsius files for bankruptcy . Since then, hundreds of thousands of users around the world have asked themselves questions about the whereabouts of their funds.
There is bad news for these people. As the Wall Street Journal reports, a large part of customer deposits now rightfully belong to Celsius itself. All cryptocurrencies that users deposited in Celsius’ Earn Program are affected . Through this, users could earn interest on their cryptos.
In absolute numbers, the equivalent of a whole 4.2 billion US dollars (as of July 2022) from around 600,000 users are affected. These do not flow back to the original owners, but remain officially under the control of Crypto Lender.
Judge Martin Glenn considers the situation to be out of the question. According to him, Celsius’ terms and conditions were clear and made it absolutely clear that users were giving up their systems.
First of all, this decision reduces Celsius’ liabilities enormously. The company is still struggling with its bankruptcy, which may now be averted more easily.
Some Celsius users retain rights to their cryptos
However, only those funds that were in the Earn Program, which was primarily promoted by Crypto Lender, are affected by the decision. Funds that were in custody , for example , still belong to the original owners – at least according to the law.
Here, too, some repayments by Celsius are still not made. However, the company has now agreed in court to repay some of those funds.
There could also be another special feature. In the period just before the company went bankrupt, Celsius changed its terms and conditions several times and asked its customers to accept the changed terms and conditions. However, only 99 percent of customers did. People who did not specifically confirm new versions may not be affected by the court’s decision.
Are all funds gone from Celsius?
Judge Glenn classifies users of the Celsius Earn program as “unsecured creditors.” These users therefore have to give up their cryptos for the time being, but in the long term they could actually receive repayments.
The decision that most Celsius customers are unsecured creditors means they have to wait for the company to put in place a reorganization plan, find buyers for its assets, or liquidate its cryptocurrency before they can recover some of their funds.
So a refund is still possible. Only the priority of these users decreases. As long as Celsius is insolvent, none of the affected investments will be paid out. Judge Glenn expressed sympathy for users of the Earn Program. In future negotiations he would therefore like to give them his fullest attention.