Bankrupt crypto lender Celsius has its lawyers claiming in court that its 1.7 million registered users across over 100 countries gave up title to the crypto they deposited into Earn and Borrow accounts.
Lawyers from the Kirkland law firm led by Pat Nash represented Celsius in its first bankruptcy hearing on July 18. The lawyer explained how retail users invested in the Earn and Borrow accounts transferred the title of their coins to the firm as per its terms of service (ToS).
Celsius is thus free to “use, sell, pledge, and rehypothecate those coins” as it wishes.
Next came the user assets held in the Custody accounts. Celsius ToS claims that the firm cannot use coins in Custody accounts without user permission.
The lawyers, however, questioned this and 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?”
The Custody program was launched for non-accredited US investors in April as some states across the country issued cease and desist orders on Celsius’s Earn program.
A Financial Times reporter tweeted that the Celsius lawyers claimed in the hearing that users of the platform would be “interested in riding out this crypto winter” and let Celsius hold funds rather than sell.
Essentially the strategy explained by Celsius’ lawyers is HODLing. The platform would like to wait for the market to turn around before selling to ensure it can stay afloat, then pay off users with assets that have more value.
Moreover, the platform also made claims that it can pay off its debt by selling Bitcoin mined through subsidiary mining operations. The CEO of the platform, Alex Mashinsky affirmed in a bankruptcy filing document that his company planned to generate about 15,000 BTC through 2023.
