Celsius Network’s Stablecoins Face Liquidation To Cover Bankruptcy Costs

Judge Martin Glenn, the chief United States Bankruptcy Judge in the Southern District of New York, has ruled that ownership of the assets in the Celsius Network’s Earn Accounts belongs to debtors. As such, Glenn ruled that all stablecoins deposited in the Earn Accounts by Celsius customers will be liquidated to meet the cost of bankruptcy proceedings. The issue at hand saw Celsius customers trapped by terms and conditions in the Earn Program.

Nonetheless, Judge Glenn indicated the court does not take lightly the results of his decision on individual investors. Moreover, Celsius customers will have to wait longer before receiving a refund from the bankrupt firm.

“Debtors contend that because the Earn Assets, including stablecoins, are property of the Estates, the Debtors can sell stablecoins to create liquidity to fund administrative expenses associated with these bankruptcy cases,” the court filings noted.

The ruling follows a recent motion filed by Celsius Network to extend the prior schedule for the Bar Date before Judge Glenn, to January 10, 2023, at 11:00 a.m. ET. 

Celsius Plays Dirty at the Mother Court

According to Celsius’s terms and conditions for the Earn program, deposited crypto assets belonged to the company following the bankruptcy filing. The court noted that customers hardly take time to completely understand the legal limitations they put themselves into by accepting terms in good faith. As such, the court felt obligated to side with the debtors due to the ‘unambiguous’ terms of use.

“The issue of ownership of the assets in the Earn Accounts is a contract law issue. The Debtors and Committee argue that the cryptocurrency assets deposited in Earn Accounts were owned by the Debtors and are now the property of the Estates. Many Earn account holders (“Account Holders”) argue that the Account Holders, rather than Celsius, own the cryptocurrency assets in the Earn Accounts and that cryptocurrency assets should promptly be returned to them,” the court filings noted.

Forward, the judge concluded that creditors will have an opportunity to have a full hearing on the merits of these arguments during the claims resolution process.

Meanwhile, Celsius customers and investors will continue waiting for the bankruptcy proceedings to take due course to get a full refund. Moreover, the cryptocurrency market is continually changing and receiving different law interpretations. Nonetheless, the Biden administration has ordered federal agencies including the SEC and CFTC to clump hard on predatory crypto projects.