In yet another blow to crypto investors, those that were participating in Celsius’ Earn program appear to have officially lost their funds that were held in Earn accounts. The ruling was handed down by Chief United States Bankruptcy Judge Martin Glenn in a memorandum opinion and order filed today regarding ownership of earn account assets.
Within the filing, Judge Glenn made the conclusion that cryptocurrency assets that were in Earn accounts as of the petition date became the property of the debtors bankruptcy estates. The decision is said to be a result of the Terms of Use employed by Celsius, which 99.86% of Earn users had accepted.
The decision is said to be a matter of contract law, with the decision referencing terms of use implemented on April 15, 2022. The document in question contained the text that “all right and title to such Eligible Digital Assets, including ownership rights,” is held by Celsius. This thereby makes Earn account holders unsecured creditors, with the recovery of such funds dependent on distributions to unsecured creditors, with Judge Glenn highlighting that “a fundamental principle of the Bankruptcy Dode is equality of distribution,” and that there will not be enough value to repay all accounts in full.
The decision is said to be of a limited scope, and does not apply to “Custody Programs, Withhold Accounts, or Borrow Program, or whether any individual Account Holder has valid defenses to the contract between Account Holders and the Debtors.”
Included within the filing is details on just at how much is at stake in making the decision. Across 600,000 Earn accounts, there sits crypto worth approximately $4.2 billion, of which stablecoins amounted to just $23.0 million. Those holdings will now represent unsecured claims.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
