Celsius Claims 80% Ownership of Customers’ Assets at First Bankruptcy Hearing
In a court hearing on Monday, the first since Celsius filed for Chapter 11 bankruptcy protection, the company’s attorneys claimed that the majority of the crypto assets on the platform do not belong to its customers.
77% of Customers’ Crypto Assets Belong to Celsius
According to the document, Celsius’s retail operation, which consists of the Earn Program, Borrow Program, and Custody Program, stipulates the ownership title of crypto assets deposited on the platform. The company’s Terms of Use (ToU) gives it the sole right to “use, sell, pledge, and rehypothecate those coins.”
In all three categories, only users of the Custody Program retain the title of the funds deposited on Celsius. However, the custody category holds only 4% of users’ deposits, while the earn and borrow sections account for more than 77% of all funds deposited on the platform.
This development comes just a few days after economist Frances Coppola hinted that Celsius’s depositors might not get back their assets after the bankruptcy filing revealed a $1.2 billion deficit on the company’s balance sheet.
“Celsius’s terms of use make it completely clear that customers who deposit funds in Celsius’ interest-bearing accounts are lending their funds to Celsius to do with as it pleases,” she said.
Celsius Reportedly Had Issues Years Before Bankruptcy
Celsius filed for bankruptcy last week after suspending withdrawals and account transfers in June due to “extreme market conditions.” Since it paused users’ withdrawals, the company has been trying to repay its collateralized loans to DeFi protocols to reclaim its locked-up assets.
While many people believe Celsius’s financial troubles resulted from a massive market sell-off induced by the Terra Luna crash, the company’s former executives have revealed that the crypto lender had several internal issues years before the bankruptcy filing.
The executives who spoke to CNBC claimed that the company hinted that Celsius was disorganised and failed to manage its risks. They also claimed that Celsius pumped the price of its native token, CEL.
Meanwhile, Tezos’s co-founder recently opined that Celsius’s bankruptcy was unsurprising because the business was built on “the theory that numbers will always go up.”
~ By William A. Frederick ~
