Celsius’s 1.7M registered users across over 100 countries risk forfeiting their token.
Celsius users gave up legal rights to their assets, says lawyer.
Pharos is listed as biggest creditor with $81 million claim.
Celsius offers creditors reduced payout now or long-term crypto pay
LAGOS (CoinChapter.com) — Embattled Celsius Network has announced plans to offer its creditors an option between receiving less than what they are owed now or letting the company hold onto their funds to ride out the crypto winter and be paid in full.
In a statement shared through its official Twitter account, the cryptocurrency lender revealed this plan. Invariably, asking its creditors to take a bet on the long-term value of crypto assets to enable the company to recover.
We intend to file a plan that will provide customers with an option to remain long crypto.
Also, in a slide presentation posted on its bankruptcy website, Celsius highlighted the two options available to creditors. It said customers could either remain ‘long’ for crypto or receive cash at a discount.
This new development means Celsius would like to hold onto users’ funds until the crypto market recovers. As a result of this move, the company might be able to stay afloat, then able to pay off creditors.
This was just as Patrick Nash, Celsius bankruptcy lawyer, revealed that the firm intends to reorganize and not liquidate. Recall that Celsius filed for court protection last week in a case involving billions of dollars tied up on its platform.
However, as the company opened its first Chapter 11 court hearing, Nash told the Manhattan bankruptcy judge that the company had plans to reorganize and recover. He said:
“This is not a liquidation. All is not lost. We intend for this to be a reorganization.”
Customers Gave Up Legal Rights To Their Token
Meanwhile, in a controversial development, Celsius said its customers’ funds practically belong to the company, not the user. Nash explained that Celsius customers essentially gave up title to their token once it’s deposited into the earn-and-borrow accounts.
He revealed that the company’s terms of service allow it to freely use, sell, pledge, and rehypothecate the coins as it pleases. As a result of this development, Nash noted that Celsius users could be treated as unsecured creditors.
The new development has caused outrage among creditors whose funds are tapped on the crypto lender platform. Daniel Gwen, an associate at a New York law firm, said Celsius had set the stage for conflict between affected entities.
“In particular, Celsius has pointed out in its pleadings that customers transferred ownership of crypto assets to Celsius, making those customers unsecured creditors. This detail may undercut customer expectations, who thought they were depositing their assets into a traditional bank-related structure.”
Gwen said.
6) Celsius lawyer just said what should make every Celsius user cringe: All the crypto is safe, Celsius has title to it, and Celsius will keep it for its own benefit until ordered otherwise. He did say that all of the numbers were unaudited, but accurate as best he knew. pic.twitter.com/Ja3Q9FEICm
— David Silver (SILVER MILLER) (@dcsilver) July 18, 2022
Similarly, another attorney David Silver corroborated Celsius’s claim to users’ funds in a post through his Twitter account. He indicated that the crypto lender has a case because it technically all belongs to the firm.
“Celsius is the owner of the crypto assets. Most of the assets in Celsius came in through the EARN program and is part of the estate.”
In another interesting development, Sam Bankman-Fried, the founder of cryptocurrency FTX, is connected to Celsius’s biggest creditor through former employees of his trading firm Alameda Research.
According to a Bloomberg report, Celsius’s Chapter 11 filing shows that it owes Pharos $81 million. However, a Google search for Pharos USD Fund SP doesn’t yield any results. The court document lists Pharos’s Cayman Islands address and an email.
In-depth research revealed that the firm’s CEO, Tara McAulay, is a co-founder of Alameda Research, Bankman-Fried’s crypto platform. Celsius currently owes Alameda $12.8 million, the bankruptcy filing shows. Bankman-Fried turned down a bailout request from Celsius as the crypto lender was teetering.
As a result of the emerging information, it is imperative to note that Bankman-Fried is a central player in the ongoing bankruptcy crisis. Moreover, as the bankruptcy proceedings continue, more details about Bankman-Fried’s involvement with the company and Pharos will likely emerge.
Daniel Abel is an experienced journalist and crypto enthusiast. He has been covering the blockchain and crypto industry since 2018 and believes digital currency is the future.
In a remarkable development for the cryptocurrency industry, the Iranian government uses digital currency to conduct official importation transactions...
In another unfortunate development for cryptocurrency investors, Hodlnaut, a digital currency lender, has announced the suspension of withdrawals, swaps,...
Cryptocurrency has been one of the more mainstream things that have been talked about, with the prices of some...
Our Partners
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
Cookie
Duration
Description
cookielawinfo-checbox-analytics
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional
11 months
The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy
11 months
The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.