Judge Says Celsius Crypto Investors Don’t Own Their Accounts
A bankruptcy judge has dashed the dreams of investors hoping to get their crypto funds from Celsius. It turns out that the assets held in the now-defunct high-interest Earn Accounts of the now-defunct crypto exchange belong to Celsius, not the account holders, according to a Wednesday ruling by Judge Martin Glenn.
In practice, Judge Glenn’s decision effectively confirms this position and means that the company has no immediate obligation to repay some 600,000 investors amid the stock market’s ongoing bankruptcy proceedings. The more than $4.2 billion that was frozen in Celsius accounts last June does not belong to the people who put it there, it is the property of the company that embezzled it.
Although, technically, the rejected profit account investors could still receive some sort of compensation from Celsius – the decision means they will be the last in line to do so. “To be clear, this disclosure does not mean that holders of Earned Assets will receive nothing from the Debtors,” Glenn wrote. “The amount of allowable uninsured claims is subject to subsequent determination in this case (through the claims process) and could potentially include claims asserted by Account Holders.” Further, Celsius customers can sue the company and claim that the terms they signed violated securities laws — but that’s no 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 to transform your current fiat currency into digital monopoly money). Although this specific decision only applies to Celsius, it highlights a much larger issue within the completely unregulated cryptoverse. Many other platforms have similar terms for account holders as Celsius did/does, Aaron Kaplan, a financial attorney and crypto company owner, told the Washington Post. Potential investors should “understand the risks they are taking when depositing their assets on insufficiently regulated platforms,” he added.
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Celsius lured customers with promises of absurdly high (read: too good to be true) 18+% interest rates, which it had to make increasingly risky maneuvers to meet. The company first stopped withdrawals and froze accounts in June 2022. And despite all its efforts to secure its users — the crypto network filed for Chapter 11 bankruptcy a month later amid a solvency crisis.
The crypto market lost $2 trillion in value between November 2021 and the summer of 2022. The native token Celsius, also called Celsius, fell more than 79% in the six months leading up to July 2022, and the exchange held a large chunk of it total funds in own currency, thrown away. As a bonus: Celsius executives raised millions in funding right before they stopped withdrawals for everyone else.
And if you think it all sounds sketchy and ponzi, know that almost every state regulatory body agrees with you. At least 40 states had opened investigations into Celsius by early September 2022. Just yesterday, the New York Attorney General announced an indictment against ousted Celsius CEO Alex Mashinsky over allegations of defrauding investors. Investors may not get their money back, but maybe Celsius and its executives will get theirs.