A federal bankruptcy judge in New York has ruled that more than 600,000 Celsius Network customers’ deposits in the Earn program belong to the company, not the users. Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York granted Celsius ownership of these funds, citing the firm’s terms of service as “unambiguous” in establishing the company’s right to lend, sell, and pledge the assets.
Key Ruling: User Deposits Now Company Property
The decision clears the way for Celsius to sell $23 million in stablecoins from its reserves, a motion it filed on September 15. The company had warned that without such funds, it could only finance its Chapter 11 bankruptcy operations until March. Under the ruling, deposits totaling $4.2 billion in cryptocurrency held by roughly 600,000 Earn program users will be treated as the estate’s property, leaving users as unsecured creditors with lower priority in bankruptcy distributions.
Judge Glenn emphasized that the terms of service, which every user must approve before using Celsius, were explicitly drafted in the company’s favor. The decision is likely to influence other crypto bankruptcy cases, including those of BlockFi and FTX, which also involve disputes over user asset ownership under Chapter 11 protection.
Broader Impacts and Privacy Breach
Beyond financial losses, Celsius customers have faced a severe privacy violation. In October, a 18.6 GB data file containing usernames, transactions, and holdings of more than 14,000 users was accidentally leaked. Affected individuals described the incident as “one of the most egregious privacy violations in crypto history.”
Legal analysts predict that this precedent could embolden other crypto firms to claim ownership of user deposits during restructuring. The ruling also intensifies calls for clearer regulatory definitions of user versus platform assets in the cryptocurrency industry.