WILMINGTON, Del. : A U.S. judge this week is considering for the first time the question of who owns bitcoin and other tokens in frozen accounts at a bankrupt digital asset exchange in a case that could shape customer protections in the cryptocurrency industry.
If Celsius deposits are determined to belong to customers, users are far more likely to get their assets returned. If the account holdings belong to Celsius, those customers will be at the back of the line for repayment, collecting pennies on the dollar. Celsius, for one, has argued that its"earn" accounts, which offer interest to customers, should be treated differently than its"custody" accounts, which provide a place to store cryptocurrency without generating interest. BlockFi, which is at the beginning of its own bankruptcy case, also offers both interest-bearing and custody accounts.
FTX customers have sought comfort in the fact that their terms of service say they own the crypto in their account. FTX founder Sam Bankman-Fried pushed back on that idea when asked about it last week during a New York Times DealBook interview. Celsius wants Glenn to declare the crypto in"custody" accounts as client property. It wants the judge to find the holdings in the high-yield"earn" accounts are property of Celsius, which plans to use some tokens to pay for the lawyers and advisers to plot a way out of Chapter 11 bankruptcy.