Since Celsius Network limited withdrawals, swaps, and transfers last month, it has been a rollercoaster for users trying to get their funds off the platform. It all came to a head last week when the lending protocol had finally filed for Chapter 11 bankruptcy, following in the footsteps of Voyager. This had given users some semblance of hope that they may get their funds back, but recent court filings show that this may not be the case.
According to proceedings that have been made public in recent times, Celsius Network may not have the best interest of its users at heart. The bankruptcy lawyers hired by the lending firm have begun to argue that users had relinquished their legal right to their funds when they deposited them on the platform. This took place on Monday during the first bankruptcy hearing, and the lawyers referred to the Terms of Service of the Earn and Borrow accounts to back up their claim.
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The lawyers argued that since the users had agreed to the Terms of Service presented by Celsius Network, they had given the platform the right to do whatever they pleased with the cryptocurrency. This included the selling, using, pledging, or rehypothecating of any coins that were deposited, and it could be done at their discretion.
If this argument is correct, then the more than 1.5 million users who have deposited their cryptocurrencies on Celsius technically do not have any ownership of them. It remains largely limited to the Earn and Borrow accounts due to the wording used in the Terms of Service.
CEL price recovers to $0.77 | Source: CEL/TETHER on TradingView.com
When taking a look at the Celsius Terms of Service, it quite clearly states that depositing coins in the Celsius Earn or Borrow accounts gives the platform full control over these assets. It states that the “Title to coins is transferred to Celsius, and Celsius is entitled to use, sell, pledge, and rehypothecate these coins.”
However, when it gets to the Celsius Custody Program, it is a different tune entirely. This part of the Terms of Service claims that the users retain the title to the coins, and Celsius will not be able to use the coins without gaining approval from the customer.
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The outcomes of these proceedings so far have sparked the debate on how much liability a user bears when it comes to what is written in the Terms of Service. It is common knowledge that most people do not read the ToS and as such, do not know what they are signing to when they use such platforms.
Even those who had crypto coins in the Custody program are not having an easy time of it. There is still debate among the lawyers on whether the title for the coins currently in Celsius’ custody belongs to the users or the platforms.
Nevertheless, it is no longer a secret that this will be a long, drawn-out battle between Celsius and its users. Given the outcome of the Mt Gox proceedings, this can be expected to be drawn out for years, and even then, users may only see pennies on the dollar for their cryptocurrencies.
Featured image from Cinco Dias, chart from TradingView.com
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