- As per Celsius lawyers, user accounts under the Celsius Earn Program have given up their legal right to Celsius.
- The embattled crypto lender asks users either to take cash at a discount than what they are owed or hold their crypto for long.
Last week, crypto lender Celsius Networks filed for Chapter 11 bankruptcy putting up a $1.2 billion hole on its balance sheet. The company has been struggling with its restructuring plans and reports are that depositors may not get their money back.
Now, Celsius lawyers have confirmed that the 1.7 million registered users across over 100 countries have given up the legal right to their crypto deposited into Earn and Borrow accounts. On Monday, July 18, Celsius had its first bankruptcy hearing wherein its lawyers at Kirkland law firm disclosed some details.
The lawyers noted that depositors with Earn and Borrow accounts have transferred the title of their coins as per terms of service. Thus, it allows Celsius to “use, sell, pledge, and rehypothecate those coins”. However, this could only be true for users’ accounts in the Celsius Earn Program.
Another legal aspect is whether Custody account holders retain their rights to crypto coins. As per Celsius’ terms of service, the company cannot use coins in custody accounts without user permission. Still, the lawyers questioned this in court to bring clarity on the matter. They asked:
Are the crypto assets in Celsius’ possession property of the estate? Is the answer to this question different for crypto assets held under the Custody vs. the Earn program?
Celsius launched its custody program earlier in April for non-accredited US investors. This was because some of the U.S. states have issued cease and desist orders on Celsius’s Earn program.
Take Cash Or Go Long In Crypto
Celsius has recently posted a presentation slide on its bankruptcy website. The company says that it will give customers the option to either recover cash at a discount or go long in crypto. Last week, Celsius filed for case protection involving billions of dollars of customers’ assets tied to the platform. During the Monday hearing, Patrick Nash, a bankruptcy lawyer for Celsius said:
This is not a liquidation. All is not lost. We intend for this be a reorganization. The company expects some users may want to receive cash recoveries but that a “substantial majority” will wish to ride out the crypto winter by remaining “long crypto”.
Just as the Office of the US Trustee appoints a panel, a committee of creditors will give customers an official voice. Nash also said that the filing has angered many of Celsius’ customers. During Monday’s hearing, Celsius lawyers revealed that some of its employees have been receiving death threats. Many of the depositors at Celsius have reportedly lost their life savings.
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