Three clients didn’t give up their quest to regain their assets and filed separate motions to reclaim their funds. Judge Glenn of the U.S. Bankruptcy Court for the Southern District of New York has once again ruled in favor of the lender, dismissing the three motions.
“For the reasons discussed in the Earn Opinion, as an Earn Account holder, the assets in Gallagher’s accounts are property of Celsius’s bankruptcy estates…Consistent with the Earn Opinion, Account Holders did not retain ownership of Earn Assets, but rather possessed a contractual right to have those assets returned by Celsius upon a request to withdraw assets,” read Judge Glenn’s ruling in a motion filed by Rebecca Gallagher, a former Earn account user.
In addition, Celsius isn’t a bank and, as such, has no claim to ownership of her assets, she argued in her motion.
The judge dismissed two similar motions filed by Kulpreet Khanuja and Mark Benzaken, two other former Earn account users.
Last kicks of a dying lender—Celsius wants to issue IOU tokens
Start a company, build it on anti-establishment hype and HODLing speculation and make hundreds of millions of dollars, go belly-up, and propose issuing worthless IOU tokens to millions of investors who lost all their money. Sounds familiar?
Celsius is seeking to become the latest company to apply this tried-and-tested digital asset Ponzi scheme formula.
The lender proposed in court recently a plan to restructure the company to a “publicly traded recovery corporation.” It plans to issue creditors with locked assets above a yet-to-be-determined threshold with an IOU token known as the Asset Share Token (AST). According to the company’s lawyers, AST holders will hold the tokens if they want to earn dividends over time—dividends from what business, you must be asking.
Those who want to exit the Celsius fiasco can sell the AST tokens in the open market. This second option is meant to hoodwink the lender’s creditors into agreeing to the restructuring under the belief that they can sell the tokens and get back their money. But then again, who will buy worthless IOU tokens from a company that went under due to gross mismanagement and fraud?
Celsius isn’t the first digital asset company to pursue the IOU token route. Bitfinex, after its 2016 hack, issued similar tokens for every dollar lost by its users. The exchange got away with it, but this had more to do with the bull market in which companies got away with everything. In today’s bear market, investors are more discerning, and this band-aid solution will likely end badly for investors.
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