Investors Lose Crypto Funds in Federal Bankruptcy Ruling
Judge Rules Celsius Network Owns Crypto Deposits
In a recent ruling, a federal bankruptcy judge determined that Celsius Network has the right to ownership of most of the cryptocurrency deposited by customers on its online platform. This means that customers of the crypto lender will be the last to receive repayment from their deposit.
What Is Celsius Network?
Celsius Network is an online platform that allows users to deposit cryptocurrency and earn interest on it. The platform was founded by Alex Mashinsky and had 600,000 accounts with a collective value of around $4.2 billion in stablecoins when it filed for Chapter 11 in 2022.
Judge's Ruling
The judge's ruling found that, according to the unambiguous terms of use, when cryptocurrency assets are deposited in the Earn Accounts, they become the property of Celsius Network. This means that customers are not always the owners of their account assets.
Fraud Allegations
The New York State Attorney General has also accused Celsius Network founder Alex Mashinsky of fraud. A complaint filed by the Attorney General claims that Mashinsky promoted Celsius as a safe alternative to banks and paid high interest rates on deposits, but that he was actually leading investors down a path of financial ruin.
The Bottom Line
This ruling and the fraud allegations against Celsius Network have shaken investor confidence in the crypto industry. It serves as a reminder that crypto investors cannot be sure that their crypto holdings are secure unless they are stored in a wallet they control. In the case of Celsius and FTX, the wallets were controlled by the platform, and the customers lost their funds.
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