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Celsius customers lose control of the $4.2 billion they deposited in accounts at the bankrupt crypto lender

crypto illustration celsiusCelsius filed for bankruptcy in July, during a crypto selloff.

(Photo by Jakub Porzycki/NurPhoto via Getty Images)

  • Celsius customers don’t own the $4.2 billion they deposited with the crypto lender, a court ruled. 
  • Their digital funds held in interest-bearing accounts are the bankrupt firm’s property, it found.
  • Wednesday’s ruling lets Celsius sell $18 million in stablecoins to fund a longer stay in Chapter 11.

Thousands of Celsius customers have lost their ownership of the billions of dollars they collectively deposited with the now-insolvent crypto lender.

A US bankruptcy judge ruled Wednesday that up to $4.2 billion in customer funds are the property of Celsius, meaning it can use them any way it wants, The Wall Street Journal reported

The decision will allow Celsius to sell $18 million in stablecoin to pay its bills to stay longer in Chapter 11 bankruptcy. The lenders’s executives previously told the court that otherwise, it will run out of money by March.

The customers affected are the 600,000 users of Celsius’ high-interest Earn accounts. The court declared them to be unsecured creditors of the failed crypto lender and said the firm doesn’t have enough of value to repay them all in full, per the WSJ.

Celsius argued that they handed over ownership of the deposits when they consented to the accounts’ terms of use — done in some cases by clicking on a button in the app. In its most recent changes to the terms, the lender threatened to freeze the accounts of people who didn’t agree to them.

Judge Martin Glenn said he “empathizes with the frustration account holders may feel if they didn’t read or understand the specific terms of use.”

According to Glenn, Celsius offered convincing evidence that more than 99% of users agreed to its recent terms and conditions over its interest-bearing accounts. 

Celsius filed for bankruptcy protection in July, after being hit by a crash in cryptocurrencies as investors rotated out of risk assets. The lender — which had almost 12 million customers and managed $11 billion in assets as of May — faces a $1.2 billion hole in its balance sheet. 

Read the original article on Business Insider