In mid-December, at a regular court session, a program for motivating Kerp employees was approved. One of the key questions which had remained unanswered however, was regarding the Earn program, more specifically who has ownership of the programs assets, Celsius or its users? A question which finally now has an answer.
The federal judge handling the bankruptcy of the company, having reviewed the terms of the program, on January 4, 2023, ruled that the funds in the Earn accounts belong to the bankrupt Celsius.
”As explained below, the Court concludes, based on Celsius’s unambiguous Terms of Use, and subject to any reserved defenses, that when the cryptocurrency assets (including stablecoins, discussed in detail below) were deposited in Earn Accounts, the cryptocurrency assets became Celsius’s property; and the cryptocurrency assets remaining in the Earn Accounts on the Petition Date became property of the Debtors’ bankruptcy estates (the “Estates”). ” - the document reads.
This is a very important decision for Celsius, because now the funds can be sold and moved to the Debtors’ bankruptcy estate. With the permission of the court, Celsius will be able to sell $18 million worth of stablecoins held in Earn accounts.
”The Amended Motion also seeks authority for the Debtors to sell approximately $18 million (in value) of stablecoins in the Earn Accounts, arguing that such stablecoins are property of the Estates and that a sale by the Debtors is permissible under section 363(c)(1) of the Bankruptcy Code in the ordinary course of business, or alternatively, under section 363(b)(1) other than in the ordinary course of business. ” - the judge ruled.
💡 What is known about the funds and accounts of the Earn program:
- According to the document, in July 2022, the value of crypto assets on Earn accounts was $4.2 billion;
- About 600 thousand accounts were registered in the Earn program;
- By September 2022, the value of stablecoins held in Earn accounts was $23 million.
According to the document, representatives for the users were, naturally, disappointed with the judges ruling. Highlighting that statements made by the former CEO, Alex Mashinsky, in addition to other external evidence, indicated that the funds in the Earn accounts indeed belonged to the users. The court ruled otherwise.
The words of the former CEO of Celsius, Alex Mashinsky, really added a lot of weight for users, which led to large losses during the bankruptcy. In this regard, Letitia James, the Attorney General of New York, said on January 5 that she had filed a lawsuit against Alex Mashinsky.
I'm suing the former CEO of cryptocurrency platform @CelsiusNetwork for defrauding investors out of billions of dollars.
— NY AG James (@NewYorkStateAG) January 5, 2023
Alex Mashinsky lied to people about the risks of investing in Celsius, hid its deteriorating financial condition, and failed to register in New York.
The Attorney General accuses Mashinsky of hiding the difficult financial situation of Celsius and deceiving investors. The judge also separately noted that more than 26 thousand New Yorkers suffered from the collapse of Celsius, while Mashinsky failed to obtain registration for Celsius to conduct securities trading in the state. As a result, the main goals of the appeal to court were compensation for the losses of New Yorkers and the implementation of a ban on doing any business in New York for Mashinsky.
”Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses. My office will stay vigilant and ensure that bad actors trying to take advantage of New York investors are held accountable.” - said Letitia.
Among the victims, Attorney James singled out several people, among whom was a disabled veteran who invested $36,000 in Celsius. In addition to a New Yorker, who made investments by mortgaging two real estate properties to invest in Celsius. It is not surprising that the attorney wants to achieve justice for New Yorkers, as one of the first steps in her career was working as a public advocate in New York. After being elected attorney General in 2018, she actively defended the rights of particularly vulnerable New Yorkers, and also challenged companies that violated state laws. She managed to win $7.5 billion for New York in court cases.
We hope that justice will prevail and the affected users will receive their money as soon as possible. We will continue to observe the Celsius bankruptcy process and inform you about the news.
