According to WSJ, Celsius Network has now acquired ownership of the $4.2 billion in cryptocurrencies that its users have deposited with it. With this action, the bankrupt platform is now free to utilize the money in any way it sees fit. Notably, around 600,00 users of the Earn program were the owners of this fund. Customers were initially able to earn interest on their cryptocurrency deposits through this scheme.
The ruling stated,
“When the cryptocurrency assets (including stablecoins, discussed in detail below) were deposited in Earn Accounts, the cryptocurrency assets became Celsius’s property; and the cryptocurrency assets remaining in the Earn Accounts on the Petition Date became property of the Debtors’ bankruptcy estates.”
Celsius’ Customers Now Unsecured Debtors
As a result, Earn clients are now categorized under bankruptcy law as unsecured debtors. There won’t be enough money, according to the court record, to fully reimburse every customer. In order to recover 100% of their claims, clients will also need to “persuade the court that they are the owners of the bitcoin assets in their accounts.”
The decision even mentioned the platform’s decision to sell the $18 million in stablecoins it had stored in Earn accounts. States in the United States had fought to prevent this transaction, claiming that Celsius Network still had enough cash on hand to continue operating for a few more months. But even in this case, the judge ruled in Celsius’ favor, saying,
“It is unnecessary to resolve whether the proposed sale of stablecoins would be in the ordinary course of business because the sale should be approved outside the ordinary course of business.”
Notably, the cryptocurrency lending site failed in July 2022, one month after it stopped accepting withdrawals due to severe market conditions. The platform’s assets at the time were customer cryptocurrencies valued at $4.2 billion, but its liabilities were $5.5 billion. Additionally, as of September 2022, the stablecoin of the Earn program was valued at $23 million.
The handling of customer cryptocurrencies during bankruptcy proceedings in the US may be influenced by the outcome of this case. It should also be highlighted that Celsius is not the only cryptocurrency company presently facing bankruptcy in the US. Notably, FTX US was the most recent crypto platform to join the list of failed ones.