A federal judge will soon decide whether depositors at Celsius Network LLC gave up ownership of their cryptocurrencies in exchange for interest payments, a key legal issue that could echo through other crypto bankruptcies.
(Bloomberg) — A federal judge will soon decide whether depositors at Celsius Network LLC gave up ownership of their cryptocurrencies in exchange for interest payments, a key legal issue that could echo through other crypto bankruptcies.
Celsius has asked for US Bankruptcy Judge Martin Glenn’s permission to sell $18 million of crypto on its balance sheet to keep paying its bills while it works on a way to repay creditors. But the coins in question came from Celsius users, who put the assets into interest-bearing accounts prior to the company’s Chapter 11 bankruptcy in July.
That means Glenn must decide whether the crypto in the company’s interest-bearing accounts belongs to Celsius or to its depositors. While hearing arguments in court Monday, Glenn said the issue is critical to the outcome of the bankruptcy — it will help potential bidders, for example, understand what exactly they’re purchasing.
“I am going to go ahead and decide who it belongs to,” Glenn said in the hearing. “The real issue is, how we can cut this enormous administrative expense and get to the goal line, to the exit?”
Given Celsius’s mounting legal bills, he has to rule on the issue soon or “there will be a corpse left,” he said.
Glenn said he likely won’t rule on the matter until at least next week.
Advisers for Celsius argued that customers signed over ownership of coins placed in interest-bearing accounts when they agreed to company’s terms of service. But some creditors — and a group of US state attorneys general — argued Monday that the terms of service were ambiguous, and pointed out that they changed over time.
The bankruptcy is Celsius Network LLC, 22-10964, US Bankruptcy Court for the Southern District of New York (Manhattan).
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