Lawyers for the bankrupt crypto lender have reaffirmed that user funds essentially belong to the company and not the user, with potentially one major exception.
According to the firm’s attorneys, Celsius’s 1.7 million registered users in more than 100 countries have ceded ownership of the crypto they have deposited in Earn and Borrow accounts.
At Celsius’s first bankruptcy hearing on July 18, attorneys from Pat Nash-led law firm Kirkland detailed how retail users with Earn and Borrow accounts transferred title to their coins to the company in accordance with its terms of service (ToS). Accordingly, Celsius is free to “use, sell, pawn and remortgage these coins” as it sees fit.
Terms of Service for Celsius Accounts
However, a legal question has arisen as to whether deposit account holders retain ownership of their assets. Celsius ToS claims that the company cannot use coins in custodial accounts without user permission. Still, the lawyers questioned whether this holds true for the cryptocurrency the company is currently in possession of. In their overview of the case, they asked:
Are the cryptocurrency assets owned by Celsius the property of the estate? Is the answer to this question different for cryptocurrency assets held under the Custody vs. the Earn?
The Custody program was launched in April for non-accredited US investors as some US states issued cease-and-desist orders under Celsius’ Earn program.
Celsius suspended withdrawals for all users on June 13 and stopped issuing new loans on July 13.
Attorney David Silver summarized Celsius’ claim to user funds in a July 18 tweet. He wrote that users should “stop thinking of it as *your* crypto” because technically everything belongs to the company.
11) Celsius says that anyone in the EARN program doesn’t have any crypto of their own (i.e., stop thinking of it as *your* crypto). Celsius is the owner of the cryptocurrency assets. Most of Celsius’ assets come from the EARN program and are part of the domain.
— David Silver (SILVER MILLER) (@dcsilver) July 18, 2022
According to a tweet from Financial Times reporter Kadhim Shubber, Nash proclaimed that Celsius users would be “interested in getting through this crypto winter” and letting Celsius hold funds rather than sell. He added that this strategy would allow users to “achieve their recovery through an appreciation of the crypto macro environment.”
Essentially, Celsius would like to wait for the market to recover before selling to ensure it can stay afloat and then pay users with assets that are more valuable.
Nash is trying to reassure Celsius customers that this will not be a liquidation and that Celsius intends to execute a turnaround plan.
“We don’t intend to force customers to take their recovery in fiat,” says Nash. ” All is not lost. »
— kadhim (＾ｰ^)ノ (@kadhim) July 18, 2022
The company also claims that it can sell Bitcoin (BTC) which it mines through its mining subsidiary to pay off its debts. Celsius CEO Alex Mashinsky claimed in a bankruptcy filing that his company plans to generate around 15,000 BTC through 2023, but David Silver doubted that claim.
Silver appeared in a Twitter space after the hearing ended. At about 1:07 into the conversation, he said Celsius’s claim of being a Bitcoin mining company is dishonest.
Can you imagine right now that Patrick Nash, basically, and Kirkland’s lawyers have now told you that Celsius is simply a bitcoin mining company? Because it’s all crap.