Crypto Lender Celsius Wins Claim Over $4.2B Earn Account

The United States Bankruptcy Court for the Southern District of New York has declared that the assets in the Earn account of Celsius belong to the firm’s estate and not its customers. The court, presided over by Judge Martin Glenn, pronounced the ruling in a court section on January 4.

$4.2B of Users’ Assets in Earn Account Belong to Celsius

Following the filing by customers of the Earn account requesting that their funds be returned, the court ruling means the assets in the account, worth over $4.2 billion, will be accorded to Celsius.

Celsius filed for bankruptcy in July 2023, and its CEO has asked users to give it time to restructure the firm. Celsius was a top-rated crypto lender with over 1.7 million users before its bankruptcy. The firm could not cope with the downturn in cryptocurrency and had a $2.85 billion gap in its pocket, forcing it to file for bankruptcy.

Celsius had over 600,000 customers in its Earn program. The lender offered up to 7% APY on stablecoins deposits and between 0.5% and 14% on other currencies.

After its bankruptcy, the firm was ordered by the bankruptcy court to refund its custodial account holders their investments. The court cited that custody account holders, unlike other account types held by the lender, still maintain ownership of their account and so deserve to get their money back. The owners of the pure custody accounts, who were 15,680 and had over $44 million in deposits, were reimbursed.

Celsius stated it intended to keep the $4.2 billion in the Earn account. The lender argued that the terms and conditions of its Earn program give the firm ownership of all assets deposited into the Earn section.

The filing revealed that 99.86% of Earn customers signed the Terms of Use versions 6 and earlier. Celsius noted that accepting those terms meant users agreed to transfer ownership of assets to the firm.

Earn Customers Termed “Unsecured Creditors” by Court

The court’s ruling on the Earn funds for Celsius estate meant those affected would be classified as unsecured creditors. The legislation also stated that their funds’ recovery depends on the distribution to unsecured creditors under the Chapter 11 bankruptcy plan or the bankruptcy’s priority rules in the case of liquidation.

The ruling also stated that only real account holders could fully recuperate their funds. It implied that, according to bankruptcy’s equality of distribution, unsecured creditors might recover only a tiny portion of their claims.