Troubled crypto lender, Celsius Network’s 1.7 million registered users across the world, do not have legal rights to the funds they deposited into Earn and Borrow accounts, the company’s lawyers believe.
First bankruptcy hearing for Celsius Network
During the first bankruptcy hearing for Celsius Network scheduled this Monday, lawyers from the Kirkland law firm explained how retail investors with Earn and Borrow accounts transferred the title of their crypto to the company as per its terms of service (ToS). Therefore, Celsius is not obligated to inform its retail investors before using, selling, pledging, and rehypothecating those coins.
However, whether Custody account holders retain title to their assets has become a legal riddle. According to the Celsius ToS, the company is not allowed to use currencies in Custody accounts without user consent. However, lawyers questioned whether this was applicable to the crypto assets that the company currently possessed.
For non-accredited US investors, the Custody program was introduced in April after some US states filed cease and desist orders over Celsius’ Earn scheme.
Notably, Celsius recently hired Kirkland & Ellis law firm led by Pat Nash, with the aim to get help it in restructuring and bankruptcy filing.
As TheCoinRise reported, recent findings by Arkham Intelligence revealed that Celsius Network entrusted corporate money worth around $530 million to an asset director engaged 0xb1 in high-risk leveraged trading strategies. The sum returned by the asset manager was $350 million, less than the value of the crypto assets Celsius Network originally delivered, confirming the reported loss caused by these extremely hazardous trading methods.
In a tweet on July 18, attorney David Silver summarized Celsius’s claim to users’ money.
https://twitter.com/dcsilver/status/1549152781487013891
According to Nash, Celsius users would like to hang onto their funds rather than sell them and “ride out this crypto winter. Users would have the chance to “realize their recovery through an appreciation in the crypto macro environment,” he continued.
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