The 1.7 million users of the Celsius crypto platform, which are spread all over the globe, have ceded the right of ownership of the crypto funds transferred by them through the use of the service provider’s crypto income accounts, as the lawyers of the insolvent company now argue.
During the first insolvency hearing of Celsius on Monday, their lawyers from the Kirkland law firm in the person of Pat Nash raised concerns that the customers of the savings platform who used the income account service transferred the ownership and usage rights to their coins in accordance with the General Terms and Conditions (GTC). According to this, Celsius was allowed to “use, trade, sell and lend” the customer funds at will.
The different Celsius accounts and their legal situation.
However, with regard to crypto assets that were held in certain custody accounts or custody accounts at Celsius, the legal situation seems much more diffuse. Thus, the terms and conditions of the platform actually state that coins in custody accounts cannot be used by Celsius without the explicit consent of the users. Nevertheless, the lawyers of the company raise the question of whether the company nevertheless also has a right of ownership of these funds:
“Do the crypto assets that Celsius owns belong to the company? When answering this question, can a distinction be made between crypto assets in custody and in income accounts?“
Since June 13, Celsius has imposed a withdrawal freeze after the crypto company has been massively in trouble due to the current bear market. So investors can no longer withdraw funds at first.
Attorney David Silver summarizes Celsius’s reasoning on Twitter. He soberly notes that users should no longer “believe that they are *their* crypto assets, because technically speaking, these are company funds”.
11) Celsius says that anyone in the EARN program has no crypto that belongs to them (i.e., stop thinking of it as *your* crypto). Celsius is the owner of the crypto assets. Most of the assets in Celsius came in through the EARN program and is part of the estate.
– David Silver (SILVER MILLER) (@dcsilver) July 18, 2022
Kadhim Shubber, a reporter from the Financial Times, meanwhile, points out that according to Celsius’s lawyer Nash, it is “in the best interest of users to wait out this crypto winter” and instead leave it to Celsius to handle the funds. As a result, the users of the platform could “support the reconstruction and benefit from the increase in value that occurs due to an improvement in the mood on the crypto market”.
Nash says Celsius’ recovery plan will involve HODLing
In short, Celsius wants to buy time until the crypto market recovers noticeably, so that the company can pay off its customers later, as soon as the existing assets have more value again.
“The vast majority of our customers are going to be interested in riding out this crypto winter, remaining long crypto, having the opportunity to realize their recovery through an appreciation in the crypto macro environment”
– kadhim (^^)ノ (@kadhim) July 18, 2022
In addition, the company argues that it can also sell Bitcoin (BTC), which are mined through a subsidiary. Celsius CEO Alex Mashinsky had calculated in the insolvency application that the subsidiary will create almost 15,000 BTC by 2024, but David Silver doubts these figures.
Following the insolvency hearing, Silver commented on Twitter that the crypto savings platform is now hardly mainly a mining company:
“It’s hard to believe that Patrick Nash and the Kirkland lawyers are now claiming that Celsius is basically a mining company. That’s total nonsense.“
Whether the Bitcoin German Nuri customers, who have kept an income account with Celsius via the Neobank, have also transferred their funds to the crypto savings platform according to this logic, remains unclear at first.