"Celsius’s 1.7 million registered users across over 100 countries gave up title to the crypto they deposited into Earn and Borrow accounts, according to the firm’s lawyers" [Newar, B. Celsius lawyers claim users gave up legal rights to their crypto. (Accessed July 19, 2022)].
At the first bankruptcy hearing on July 18, Celsius legal counsel Kirkland & Ellis stated that customers had transferred their title to coins to Celsius under the e-Terms of Use (“TOUs”). As such, the team of lawyers, led by Pat Nash, said Celsius is 'entitled to use, sell, pledge and rehypothecate those coins'.
[Sriram, S. Celsius Bankruptcy Hearing: Lawyers Claim Users Gave Up Legal Rights To Crypto. (Accessed July 19, 2022)].
It should be noted that this claim applies to only Celsius' Earn and Borrow accounts. An apparent exception exists with respect to the company's Custody accounts. The Celsius Terms of Use in this regard provides in pertinent part:
Title to any of your Eligible Digital Assets in a Custody Wallet shall at all times remain with you and not transfer to Celsius. 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.
[Celsius. Terms of Use. (Accessed July 19, 2022)].
Nonetheless, "lawyers questioned whether this holds for crypto that the firm is currently in possession of. In their overview of the case, they asked: 'Are the crypto assets in Celsius’ possession property of the estate? Is the answer to this question different for crypto assets held under the Custody vs. the Earn program?" [Newar, supra].
David Silver, a Securities fraud and investment loss attorney closely following the bankruptcy proceedings, in this regard tweeted:
"According to a tweet from Financial Times reporter Kadhim Shubber, Nash proclaimed that Celsius users would be 'interested in riding out this crypto winter' and let Celsius hold funds rather than sell. He added that this strategy would allow users the opportunity to 'realize their recovery through an appreciation in the crypto macro environment" [CoinDCX Blog. Top Crypto News: 1.7 million registered users on Celsius Network Gave Up Legal Rights to their Crypto. (Accessed July 19, 2022).
"Essentially, Celsius would like to wait for the market to turn around before selling to ensure it can stay afloat, then pay off users with assets that have more value" [Newar, supra].
"Just as the Office of the US Trustee appoints a panel, a committee of creditors will give customers an official voice. Nash also said that the filing has angered many of Celsius’ customers. During Monday’s hearing, Celsius lawyers revealed that some of its employees have been receiving death threats. Many of the depositors at Celsius have reportedly lost their life savings" [Akolkar, B. Did Celsius users give up legal rights to their crypto? Lawyers claim so!. (Accessed July 19, 2022)].