Most of the digital tokens that customers deposited in Celsius Network's interest-bearing accounts are owned by the insolvent cryptocurrency lender, U.S. Bankruptcy Judge Martin Glenn ruled earlier this week in New York, as reported by Reuters.
The ruling was said to impact ~600,000 accounts with assets valued at $4.2B when Celsius filed for bankruptcy in July 2022. Of note, the firm does not have adequate funds to repay those deposits in full.
In other words, customers who held non-interest bearing accounts as well as other secured creditors will be of higher priority than the majority of customers that held interest-bearing accounts. The ruling means that the latter group will be treated as unsecured creditors and will be last in line to get their deposits back.
Still, Glenn noted that Earn users will not get "nothing" in Celsius' bankruptcy.
In determining who owned the assets deposited in Celsius's interest-bearing Earn products, Glenn called the terms of use "unambiguous," said Bradley Duke, co-CEO at ETC Group. "This really drives the point home that before making an investment, it really is worth reading the fine print and thinking about what it would mean in a scenario of extreme stress."
Previously, (Dec. 2, 2022) Galaxy Digital (OTCPK:BRPHF) won an auction for Celsius' self-custody platform.
