Celsius Borrowers: Bankruptcy Estate Should Return Collateral
Eleven claims for relief lay out the argument for Celsius borrowers to get their collateral back
An Ad Hoc group of borrowers is hoping to get their hands on assets currently held up in legal limbo in Celsius’s bankruptcy case, according to a Tuesday court filing.
The group argues that cryptocurrency put up as collateral for loans should not be included in the bankruptcy estate, according to the complaint filed in US Bankruptcy Court for the Southern District of New York.
The group is looking for a declaratory judgment ruling that the collateral crypto be returned to the original owners. The group is also requesting Celsius provide accounting documents.
The complaint makes the argument that “It is inequitable and unjust to permit the Debtors’ bankruptcy estates to continue to retain the Collateral.”
The filing alleges that Celsisus “engaged in deceptive trade practices,” committed fraud, and violated various consumer finance laws and licensing requirements.
The complaint lists eleven claims for relief including:
- Declaratory Judgment Pursuant to Bankruptcy Rule 7001(9) that Collateral is Not Property of the Estate
- Accounting and Turnover of Collateral
- Deceptive Trade Practices
- Consumer Fraud
- Unlawful Provision of Money Services
- Fraudulent Misrepresentations
- Declaratory Judgment that the Loans are Void and Unenforceable Due to Fraudulent Inducement
- Breach of Contract
- Unjust Enrichment
Borrowers have not been able to access funds from their Celsius accounts since June 2022, the complaint alleges. Celsius filed its voluntary petition in relief with the bankruptcy court in July 2022.
The complaint comes shortly after it was revealed that it will likely be impossible to make all creditors whole.
A federal bankruptcy judge ruled in January that Celsius Network owns the tokens customers deposited into its interest-bearing accounts before the lender went under. When Celsius filed for bankruptcy, it had about 600,000 accounts in the company’s highest yield-bearing cryptocurrency products.
As of July 2022, such accounts totaled a scant $4.2 million, according to a January court filing. “There simply will not be enough value available to repay all [Celsius customers] in full,” the filing said.