Celsius has claimed ownership over most clients’ funds

Lawyers claim that 77% of user deposits belong to the platform in accordance with its terms of service

19.07.2022 - 12:45

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What’s new? At the first court hearing in the bankruptcy case of the Celsius lending platform, defense lawyers claimed that most of the funds that users deposited on the platform were actually at the company’s disposal. Lawyers for Kirkland & Ellis explained that there are three key programs that stand out in the retail part of Celsius’ business operations: earning, borrowing and custody. Of these, the latter is the only segment in which the deposited funds are in the full authority of the user.

Court documents

What does this mean for Celsius clients? The custody program accounts for only about 4% of all deposits on the platform. The main share of investments was made in the earnings program, accounting for 77% of all client deposits. Thus, according to the platform’s terms of use, “title to coins is transferred to Celsius, and Celsius is entitled to use, sell, pledge, and rehypothecate those coins.”

Celsius situation. On July 13, a month after the withdrawals were frozen, Celsius settled its debts to creditors, returned collateral totaling more than $1 billion, and declared bankruptcy to restructure.

Even before the filing, KeyFi, which had previously acted as Celsius’ investment manager, accused it of failing to pay interest on its profits as part of the collaboration, as well as of running a Ponzi scheme. Later, a class action lawsuit accusing Celsius of running a fraudulent scheme was also filed by investors. They claim Celsius made around $10 billion by luring new investors with the promise of higher interest rates.

For more details on how Celsius lost its customers’ hundreds of millions of dollars on high-risk schemes, see the GetBlock Magazine editorial’s feature.

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