It has been over nine months since Celsius Network froze users’ assets prior to filing for bankruptcy in July of 2022. All this time, more than a million users who invested money into the lending platform could not request withdrawals or transfers. That includes retail investors and accredited-investor giants. Among the latter affected by the collapse of Celsius is Japanese crypto whale Kohji Hirokado. Hirokado was an early investor in Ethereum and Cardano, and trusted Celsius enough to deposit almost $40 million worth of crypto on the platform, which is still stuck on the platform.
Locking up the funds was a step taken by the company to ensure transition into Chapter 11 bankruptcy. The lending platform had to file for bankruptcy as it was struck by the volatility on the crypto market and could not proceed with regular activity after taking risks that were supposed to keep bringing customers the promised high interest rates even as the demand for crypto loans from institutional investors declined.
Even though “eligible” Celsius users have recently claimed that the withdrawals from the platform have been re-opened, it will still be challenging for most to get any of their assets back, and almost impossible to withdraw the funds in full. This realization came to most users following the ruling stating that Celsius legally owns users’ crypto accounts that were part of the platform’s Earn program — the program that was supposed to bring investors the highest yield.
The judge’s decision is based on the platform’s fine-print “unambiguous” terms and conditions, of which most of the investors might not have even been aware of. It also shows how much the lack of crypto regulation that once symbolized the decentralized nature of alternative currency can harm its adopters and pave way for fraudulent actions.
As the regulatory framework surrounding digital assets is only taking shape now, this decision, as well as the verdicts of upcoming lawsuits related to crypto ownership, might become a precedent for future proceedings. The decision confirming Celsius’ ownership of crypto invested into the Earn program raises a vital question of what owning digital assets could legally mean. The case also shines a light on what may happen with the crypto invested in other projects who filed for Chapter 11 bankruptcy last year, including FTX and BlockFi.
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