Legal Heat Intensifies Against Celsius, Custody Users Wage War to Get Rights to Their Funds

In a bid to get the collective amount of $180 million (roughly Rs. 1,415 crore) in question, the custody claimants have enlisted the services of Kyle J. Ortiz.

By Radhika Parashar | Updated: 2 August 2022 13:11 IST

Legal Heat Intensifies Against Celsius, Custody Users Wage War to Get Rights to Their Funds

Photo Credit: Pixabay/ WorldSpectrum

Celsius Network is looking to keep its business afloat amid recent crypto downturn

Highlights

More custody account owners on Celsius can join cause
Claimants have hired representative from Togut, Segal & Segal LLP
Celsius lawyers had claimed custody account owners could lose assets

Celsius is now up in a legal suit against people who held custody accounts on its platform. After Celsius lawyers recently claimed that custody account holders may have lost the ownership of their assets, these users have joined forces against the crypto lending firm. In a bid to get the collective amount of $180 million (roughly Rs. 1,415 crore) in question, the custody claimants have enlisted the services of Kyle J. Ortiz, a partner at the corporate restructuring firm Togut, Segal & Segal LLP.

After Celsius filed for bankruptcy earlier this month, over 300 custody account owners on the platform have raised around $100,000 (roughly Rs. 80 lakh) to support their legal work, a CoinDesk report said.

“Everyone is signing engagement letters. We grew our group from just a few individuals to almost 400 in a matter of days. I have no doubt we will get there,” the report quoted David Little as saying. Little is one of the organisers of the group of claimants.

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As per lawyers representing Celsius, users who operated custody accounts on the Celsius Network may have signed away their own rights to their crypto assets while accepting the platform's terms of service (ToS).

Celsius launched this Custody programme in April for non-accredited investors in the US. Unlike Celsius clients, who deposited funds in the company's high-yield Earn product, custody clients did not collect interest. They used Celsius for storage, not to put their money to work.

Celsius lawyers have recently claimed that the platform may have already transferred the title of their assets to the crypto lending firm, that is now free to use, sell, pledge, and rehypothecate them according to its requirements.

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Earlier last month, Celsius hired a legal team from the Kirkland & Ellis LLP law firm to assist it in the process of its corporate restructuring.

Meanwhile, hundreds of letters have poured in to the judge overseeing the firm's multi-billion-dollar bankruptcy and they are heavy with anger, shame, desperation and, frequently, regret.

An Irishman at risk of losing his farm. An American having suicidal thoughts. An 84-year-old widow's lost life savings: People caught in the meltdown of crypto lender Celsius are pleading for their money back.

Amid Celsius looking to restructure its corporate functioning, it faces other risks as well.

Last week, Celsius Network disclosed to its community that it has suffered a data breach, warning users against threats of phishing attacks. The firm is now in the process of informing its users about this breach, asking them to be alert and not share sensitive information with unverified strangers.

For now, Celsius is aiming at keeping its business afloat somehow given the downturn that the crypto market has taken in recent months.

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Further reading: Cryptocurrency, Celsius, Custody Accounts

Radhika Parashar

Email Radhika

Radhika Parashar is a senior correspondent for Gadgets 360. She has been reporting on tech and telecom for the last three years now and will be focussing on writing about all things crypto. Besides this, she is a major sitcom nerd and often replies in Chandler Bing and Michael Scott references. For tips or queries you could reach out to her at RadhikaP@ndtv.com. More