Judge supports Celsius by rejecting petition of injured users
2023.01.25 14:30
Judge supports Celsius by rejecting petition of injured users
By Tiffany Smith
Budrigannews.com – Since July, a judge in charge of the bankruptcy proceedings for the crypto lending company Celsius Network has denied motions from three different users with various claims on assets that have been stuck.
A motion from Celsius claimant Rebecca Gallagher, who argued that her interest-bearing ‘Earn’ assets on the platform were “her property and not property of the bankruptcy estates” under the control of the debtors, was denied by Judge Martin Glenn in orders filed with the United States Bankruptcy Court in the Southern District of New York on January 25. Mark Benzaken and Kulpreet Khanuja, both Celsius account holders, were denied similar motions by the judge.
The three individuals filed motions claiming that Celsius’s terms of service prevented them from transferring their assets to the debtors’ control in the event of bankruptcy. Both Gallagher and Khanuja named Alex Mashinsky, claiming that the former CEO of Celsius lied to customers in public statements and claimed that users would keep full ownership of their assets.
Judge Glenn denied all three motions, stating that the court took Mashinsky’s allegations “seriously.” He argued Khanuja’s case by saying:
“The ownership of the cryptocurrency deposited in Khanuja’s account would not be affected by any claim that Celsius violated its contract with Khanuja.” The Earn Opinion explains, “the cryptocurrency in Khanuja’s Earn Accounts was and remains property of the estate.” The cryptocurrency deposited in Earn Accounts became Celsius’s property.
In December, Louise Abbott, a partner at Keystone Law in the United Kingdom, told Cointelegraph that FTX users could use a legal strategy to say that their crypto and fiat assets “remained their property at all times” and shouldn’t be under the control of the debtors’ estates.
The exchange is also going through the bankruptcy process in the United States. The recent rulings in the Celsius case suggested that the platform’s terms of service granted it “all right and title to such Digital Assets, including ownership rights,” despite Abbott’s reference to FTX funds donated to third parties.
In June 2022, Celsius reported liquidity issues and cited “extreme market conditions” as the reason for blocking user withdrawals. In July, the company declared bankruptcy.
Mashinsky has been accused by authorities in the United States of contributing to the platform’s demise by allegedly concealing the company’s “dire financial condition” and making “false and misleading statements” to investors.
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