Bankrupt Celsius ordered by court to return $ 50 million to users

Alex Mashinsky’s bankrupt crypto lending platform Celsius must return $50 million in assets to customers. The reason for this is that this specific group of customers only used Celsius as a storage platform. According to Celsius and the judge they do not belong to the so-called estate of the bankrupt lending platform.

Good news for small group

This is good news for a relatively small group of 15,680 customers who held funds with the lending platform in this way. They will get at least part of their credit back. That doesn’t change the fact that Celsius still owes billions of dollars to other users. In that respect, it remains a major drama for the savings of a gigantic group of people.

The judge reached the aforementioned judgment on Wednesday 7 December. Celsius argued that, unlike customers using Earn and Borrow products, this group legally retained ownership of its own assets. Celsius was merely the manager of the assets in the case of this small group. There is an important lesson here.

Think carefully about the risks

You have to think carefully about storing your crypto with centralized parties, but there is also a difference in the products. If you use a trading platform purely as a management party for your crypto assets, you will in some cases remain the owner under the law. This can be important in bankruptcy proceedings.

In the case of Earn, Staking and other services, the fine print may state that you are temporarily transferring ownership in exchange for a return. If a party goes bankrupt when the assets on paper no longer fall under your ownership, this can cause a problem. Officially, the assets are from the platform at that time and they fall into the estate. That means you have to queue with all the other creditors to get something back.

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