Claimants argue that Celsius bever mentioned anything about transferring ownership and control of assets to debtors.
In what could be setting a major precedent, the United States Bankruptcy Court in the Southern District of New York has dismissed the claims of three users of the bankrupt crypto lender Celsius Network. According to orders filed with the bankruptcy court, the three individuals are identified as Rebecca Gallagher, Mark Benzaken, and Kulpreet Khanuja.
The trio submitted arguments to the court about their “Earn” assets which had been stuck on the Celsius platform since last July. According to them, the assets are “their property and not property of the bankruptcy estates.” They also argue that the assets should remain under their control and not under the control of the debtors.
Furthermore, the trio also argued that Celsius was unclear in its terms of use, particularly concerning bankruptcy. They also claim that the firm’s CEO Alex Mashinsky severally suggested that users would retain full ownership of their assets. To them, this was misleading, to say the least. In all his public statements, Mashinsky never mentioned anything about transferring ownership and control of assets to debtors, they added.
Court Denies Celsius Assets Claim, Issues Verdict
Meanwhile, Judge Martin Glenn who is in charge of overseeing the bankruptcy proceedings for Celsius Network has denied the motions. That was after admitting the seriousness of the allegations against Mashinsky’s person. Nonetheless, he affirmed that any claims that Celsius breached its contract would not affect that any “cryptocurrency deposited in Earn Accounts became property of Celsius account.” Glenn then added that, as a result, the assets being claimed were and would remain property of the estate.
Meanwhile, it might be worth mentioning that the Celsius case could affect a lot more people in general. For instance, the FTX exchange is also in a similar situation with its ongoing bankruptcy process in the US. And just as is the case with Celsius, FTX users may also want to claim that their crypto and fiat assets “remained their property” at any given time. With the new ruling, however, it appears that platforms are granted all rights and titles in the event of bankruptcy.
Celsius first announced its liquidity issues in June 2022 and soon halted withdrawals on its platform. At the time, it cited the difficult market situation. By July, however, it later filed for bankruptcy.
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