A New York bankruptcy court has ruled that deposits in a high-interest earning account belong to Celsius, an embattled former cryptocurrency lending company that filed for Chapter 11 bankruptcy protection in July. The ruling establishes a precedent that may affect the status of other, similar cases involving crypto companies like Blockfi and FTX.
Celsius takes ownership of user deposits
A U.S. bankruptcy court has issued a significant ruling in a dispute maintained by former cryptocurrency lender Celsius and its customers over ownership of deposits. Judge Martin Glennof the New York bankruptcy court ruledin favor of the company, stating that the company has rights to these funds and permits it to use the assets in any way it chooses, including lending, selling, and collateralizing these assets for investment purposes.
The company filed a motion on September 15 to obtain approval to sell $23 million from its stablecoin stash, but the ruling frees the way for the company to complete this operation. The ruling states that Celsius’ terms of service – a contract that all users must approve before being serviced by the company – were “clear” in establishing ownership of these funds deposited in favor of the company.
Affected Users and Consequences
The ruling may affect other cases involving companies that have invoked Chapter 11 bankruptcy benefits, such as Blockfi and FTX. The lending company’s 600,000 customers were affected by this decision and were part of the Earn program, which resulted in higher interest on their accounts, which they had included $4.2 billion in cryptocurrency. These customers are now classified as unsecured creditors, which will likely affect the size and significance of their claims in the future.
This allows the company to use some of its funds for Chapter 11 proceedings. Previously, the company had stated before the bankruptcy court that its current funds would only cover operations through March.
Celsius’ bankruptcy proceedings have also affected customer privacy, as a filing detailing the usernames, transactions, and holdings of all users of the exchange was made public in October. At the time, more than 18.6 gigabytes of data corresponding to more than 14,000 customers of the exchange were disclosed, a situation that has been identified by some users as one of the “worst privacy breaches in the history of crypto.”
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