A number of irate creditors claimed that the suspension of withdrawals on Celsius custody is against the explicit language of the company’s terms of service.
As displeased users take legal action to retrieve their assets after the platform froze withdrawals in June, the bankrupt cryptocurrency lender Celsius Network is dealing with new legal concerns.
64 custodial account holders at the company together filed a case on Wednesday seeking the return of their assets with the United States Bankruptcy Court for the Southern District of New York.
In total, the bitcoin assets kept in Celsius’ custody service are valued at more than $22.5 million, according to court filings. The creditors want their money back. Togut, Segal & Segal, a law company that specializes in bankruptcy, provides the group’s legal counsel.
According to the plaintiffs, Celsius “has not honored any withdrawals from any programs,” including custody services. This is in conflict with the “clear language of the debtors’ terms of use,” which state that title to custody assets “always remains with the user,” according to the complaint.
The right to any digital assets stored in Celsius’ custody wallet shall “at all times stay” with clients, as stated in the company’s rules of usage.
“Celsius will not transfer, sell, loan or otherwise rehypothecate eligible digital assets held in a custody wallet unless specifically instructed by you, except as required by valid court order, competent regulatory agency, government agency or applicable law,” the statement reads. The terms of use were last revised in April 2022, they note.
One of the numerous crypto lending platforms that have encountered significant problems as a result of the present bear market and related liquidity problems in the crypto lending industry is Celsius. The majority of the company’s obligations, totaling $1.2 billion, are owed to its customers. In the middle of July, Celsius filed for Chapter 11 bankruptcy protection.
Late in August, Celsius sued significant U.S. custodian Prime Trust amid persistent legal and liquidity issues. The company said that when Prime Trust ended its business partnership with the lending company in June 2021, it did not return $17 million worth of cryptocurrency.
