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Celsius is faced lawsuit action from dissatisfied custodial clients over a $180M deposit

Source: CryptoSlate
1659521929 03 Aug / 10:18

Celsius is being sued by a group of custodial clients wanting a return of their $180 million aggregate deposit.

Four percent, or $180 million, of the total assets locked in the Celsius network are held by the expanding group of 400 consumers. The group has retained Kyle J. Ortiz, a partner at the corporate restructuring firm Togut, Segal & Segal LLP, to represent them in their legal action.

As everyone signed the engagement letters, one of the group's leaders, David Little, noticed that the legal effort was garnering full support from aggrieved consumers.

David commented on the attentiveness of the group: Our organization went from a handful of people to over 400 in a couple of days, and we funded $100,000 with a bunch of competent strangers.

As they had lost trust in Kirkland & Ellis, a law firm representing Celsius, the disgruntled consumers resorted to financing their attorney to get a refund. They said the legal firm was protecting its principal’s interests at the expense of returning clients’ monies.

When representing Celsius in its first bankruptcy hearing on July 18, attorneys from Kirkland & Ellis asserted that customers forfeited their legal rights to their crypto assets when they signed the terms of service.

Customers who participated in the Celsius Earn program have given ownership of their coins to the company. Since Celsus possessed the keys, they also kept the money and were free to use, sell, pledge, and rehypothecate them. Customers received interest on their deposits but forfeited ownership of their possessions.

Attorney David Silver issued the following tweet:

“10) The Trustee also asked for blockchain analysis related to crypto transfers. The Judge flat out said: You need to show all crypto transfers. Celsius so far is trying to hide that information. The point of the blockchain is that this information is easily accessible.”

“11) Celsius says that anyone in the EARN program has no crypto that belongs to them (i.e., stop thinking of it as *your* crypto). Celsius is the owner of the crypto assets. Most of the assets in Celsius came in through the EARN program and is part of the estate.”

In the instance of consumers utilizing the Custody program, they kept ownership of their assets but could not receive income. Celsius asserted that owning a custodial account does not ensure consumers’ ability to reclaim their cash in the event of bankruptcy.

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