Top Crypto News: 1.7 million registered users on Celsius Network Gave Up Legal Rights to their Crypto

It is no news that the crypto crash of 2022 was set afloat after the LUNA crash in May. Following the crash, many corporate organizations like Vauld, Celsius, and Coinbase announced withholding on withdrawals or news about layoffs due to the exponential growth of the company. The onset of one after another unsettling news surrounding the crypto market coupled with the Indian government introducing 1% TDS on certain crypto transactions has propelled the crypto bear market scenario. The prolonged phase of the bear run is now being termed as crypto winter by the crypto community. 

Additional Read: What is Crypto Winter?

Following the crypto crash, Celsius used up its treasury to pay off all loans and worked towards saving the company, it has recently filed for bankruptcy. This step has been taken by the company to restructure the organization better. However, the company did use its user’s funds to liquidate some of the assets to pay off the debts. When the organization was questioned about the same, its lawyers from Kirkland law firm led by Pat Nash mentioned that “user funds essentially belonged to the company and not the user, with potentially one major exception.” 

As reported by CoinTelegraph, according to the lawyers from the Kirkland firm, “Celsius’s 1.7 million registered users across over 100 countries gave up title to the crypto they deposited into Earn and Borrow accounts.”

On the first hearing of Celsius, which was held on July 18, 2022, the lawyer group from Kirkland law firm led by Pat Nash mentioned in detail, how retail users with the Earn and Borrow account access, transferred the title of their coins to the firm as per its terms of service (ToS). As a result of which Celsius is free to “use, sell, pledge, and rehypothecate those coins” as it wishes. 

According to the CoinTelegraph report, Attorney David Silver summed up Celsius’s claim to users’ funds in a July 18 tweet. He wrote that users should “stop thinking of it as *your* crypto” because it technically all belongs to the firm.

10) The Trustee also asked for blockchain analysis related to crypto transfers. The Judge flat out said: You need to show all crypto transfers. Celsius so far is trying to hide that information. The point of the blockchain is that this information is easily accessible. pic.twitter.com/lzDAB6MNKs

— David Silver (SILVER MILLER) (@dcsilver) July 18, 2022

However, a legal question has arisen about whether Custody account holders retain title for their assets. Celsius ToS claims that the firm cannot use coins in Custody accounts without user permission. Still, lawyers questioned whether this holds for crypto that the firm is currently in possession of. In their overview of the case, they asked: “Are the crypto assets in Celsius’ possession property of the estate? Is the answer to this question different for crypto assets held under the Custody vs. the Earn program?”

According to a tweet from Financial Times reporter Kadhim Shubber, Nash proclaimed that Celsius users would be “interested in riding out this crypto winter” and let Celsius hold funds rather than sell. He added that this strategy would allow users the opportunity to “realize their recovery through an appreciation in the crypto macro environment.”

Nash says Celsius’ recovery plan will involve HODLing

“The vast majority of our customers are going to be interested in riding out this crypto winter, remaining long crypto, having the opportunity to realise their recovery through an appreciation in the crypto macro environment”

— kadhim (＾ｰ^)ノ (@kadhim) July 18, 2022

Source: CoinTelegraph

Additional Read: Top Crypto Prices Today

What Happened to Celsius?

Celsius is one of the biggest crypto lending platforms in the world which claimed to hold assets worth $20 billion according to PRNewswire. The memo addressing the Celsius community stated, ‘ We understand that this news is difficult, but we believe that our decision to pause withdrawals, Swap, and transfers between accounts is the most responsible action we can take to protect our community. We are working with a singular focus: to protect and preserve assets to meet our obligations to customers. Our ultimate objective is stabilizing liquidity and restoring withdrawals, Swap, and transfers between accounts as quickly as possible. There is a lot of work ahead as we consider various options, this process will take time, and there may be delays.’

Valued at $3.25 billion after extending its “oversubscribed” Series B financing round to $750 million in November, Celsius allows its users to deposit their tokens; Bitcoin, Ethereum and Tether; and receive weekly interest payments. Celsius has also offered to pay interest which can go as high as 18% a year to customers who will transfer their tokens to the platform, according to Reuters. 

Additional read: What happened to Celsius?

Celsius Declaring Bankruptcy

According to a CNBC report on July 14, 2022, Celsius has informed: “state regulators that it’s filing for bankruptcy ‘imminently.” Today, Cryptoslste reported that the company has actually “initiated voluntary Chapter 11 proceedings.” Celsius revealed in the press release that it only holds $167 million in cash, which will be used to “support operations.” The voluntary liquidation aims to give the company: “the opportunity to stabilize its business and consummate a comprehensive restructuring transaction that maximizes value for all stakeholders.”

What is Celsius?

Celsius is one of the biggest crypto lending platforms built with the vision that financial services should be focusing in doing what is in the best interest of the customers and the community. The blockchain-based platform was working towards providing the members with access to curated financial services that are not available through traditional financial institutions. 

Founded in 2017, Celsius is one of the biggest crypto lending platforms in the world. The Celsius Networks LLC caters to the vision of financial freedom. Their platform had been working toward providing investors with fair yield, zero fees, and lightning-quick transactions via crypto. 

To put it simply, Celsius Network is a democratized interest income and lending platform built on the belief that financial services should work towards solutions that are in the best interests of the community. Within the Celsius platform, crypto holders can earn interest by transferring their coins to their Celsius Wallet and borrowing USD against their crypto collateral at interest rates as low as 4.95% APR, as mentioned in the Celsius blog.