Celsius is facing legal action from a group of custody clients seeking a refund of their collective $180 million deposit.
The growing group of 400 customers owns about 4% of the total assets locked in the Celsius network — equating to $180 million. To proceed with their legal action, the group has engaged the services of Kyle J. Ortiz, a partner at the corporate restructuring firm Togut, Segal & Segal LLP.
One of the group organizers, David Little, noted that the legal movement was receiving maximum support from affected customers as everyone signed the engagement letters.
Commenting on the responsiveness of the group, David said:
“We grew our group from just a few individuals to almost 400 in a matter of days and have raised $100,000 with basically a group of competent strangers.”
The aggrieved customers resorted to funding their lawyer to seek a refund, as they had lost faith in Kirkland & Ellis, a law firm working on Celsius’s behalf. They claimed that the law firm was working to protect its principal’s interest with little effort to return customers’ funds.
Celsius claims on user funds
Lawyers from Kirkland & Ellis, while representing Celsius in its first bankruptcy hearing on July 18, claimed that users relinquished the legal rights to their crypto assets when they accepted the terms of service.
Customers using the Celsius Earn program had transferred the title of their coins to the firm. Consequently, since “Celsius owned the keys, they owned the coins” and were free to use, sell, pledge, and rehypothecate the coins. Customers earned interest on their deposits but lost control of their assets.
Attorney David Silver commented in a tweet:
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.
— David Silver (SILVER MILLER) (@dcsilver) July 18, 2022
In the case of customers using the Custody program, they still retained the title of ownership to their assets but were not entitled to earn any interest. Celsius claimed that holding a custody account does not guarantee that users will be able to recover their funds in the face of bankruptcy.