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Judge Says Celsius Cryptocurrency Investors Don't Own Their Accounts

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A bankruptcy judge has dashed the dreams of investors hoping to recover their crypto funds from Celsius. As it turns out, the assets placed in the defunct cryptocurrency exchange’s high-interest “earning accounts” belong to Celsius, not the account holders, according to Wednesday’s decision by Judge Martin Glenn.

The decision boiled down to an “unambiguous provision” in a section of Celsius’s terms of use, the judge wrote. “All rights and title to such Eligible Digital Assets, including ownership rights,” are held by Celsius, said version 8 of the company’s terms, which 99.86% of Earn account holders agreed to, Glenn noted. Celsius’ incredibly obscure terms of service also stated to signatories that “you may have no legal recourse or right” to get your money back — which the company has previously argued protects them from legal claims.

In practice, Judge Glenn’s decision effectively confirms that position and means the company has no immediate obligation to repay some 600,000 investors amid the stock market crash. ongoing bankruptcy proceedings. The more than $4.2 billion that was frozen in Celsius’ accounts last June doesn’t belong to whoever put it there, it belongs to the company that wasted it.

While technically Earn account investors have rejected could still get some type of Celsius offset – the decision means they will be last in line to do so. “To be clear, this discovery does not mean that Earn Asset holders will get nothing from debtors,” wrote Glenn. “The amount of allowable unsecured claims is subject to further determination in this case (through the claims allowance process) and may include damages claimed by account holders.” Furthermore, Celsius customers could sue the company and claim that the terms they signed violated securities laws – but that’s not a guarantee of a refund.

If nothing else, let this be a reminder to always read the fine print when it comes to large financial transactions (and not turning your real fiat currency into digital monopoly money). While this specific decision only applies to Celsius, it highlights a much larger problem within the fully unregulated cryptoverse. Many other platforms have similar terms for account holders such as Celsius did/does, Aaron Kaplan, Financial Lawyer and Crypto Business Owner, told the Washington Post. Prospective investors need to “understand the risks they run by depositing their assets on poorly regulated platforms,” ​​she added.

Celsius enticed customers with promises of absurdly high (read: too good to be true) interest rates of over 18%, which it had to take increasingly risky maneuvers to deliver. The company first withdrawals stopped and froze accounts in June 2022. And despite all its attempts to reassure its users – the cryptographic network filed for Chapter 11 bankruptcy a month later, in the midst of a solvency crisis.

The cryptocurrency market lost $2 trillion in value between November 2021 and summer 2022. The native token Celsius, also called Celsius, plummeted by over 79% in the six months leading up to July 2022, and the exchange was holding a large portion of its total funds on its own , spoiled coin. As a bonus: Celsius executives withdrew millions of funds just before they stopped withdrawals for everyone else.

And if you think it all sounds superficial and ponzi, just know that almost all state regulatory bodies agree with you. At least 40 states have opened investigations into Celsius for early september 2022. Just yesterday, the attorney general of New York announced a lawsuit against dethroned Celsius CEO Alex Mashinsky over allegations of misleading investors. Investors may not get their money back, but perhaps Celsius and its executives will get their comeuppance.