The United States Bankruptcy Court for the Southern District of New York has ruled that funds in the Earn account of Celsius are the property of the bankrupt crypto lender, not the investors who deposited them. The account contains approximately $4.2 billion in crypto as of July 10, 2022.

“The Court concludes, based on Celsius’s unambiguous Terms of Use, and subject to any reserved defences, that when the cryptocurrency assets (including stablecoins) were deposited in Earn Accounts, the cryptocurrency assets became Celsius’s property; and the cryptocurrency assets remaining in the Earn Accounts on the Petition Date became property of the Debtors’ bankruptcy estates (the “Estates”),” the ruling document stated.

The ruling means Celsius customers who own non-interest-bearing accounts and other secured creditors will be treated with higher priority during repayments than those with Earn accounts.

Nonetheless, the judge noted that the ruling does not mean Earn customers, who have now been classified as unsecured creditors, will get nothing in the bankruptcy case but will only be taken care of after Celsius repays higher-priority customers.

Last month, the Judge ordered Celsius to return cryptocurrency worth approximately $50 million to custody account users. Meanwhile, the latest ruling also authorised Celsius to sell approximately $18 million in stablecoins held in customers’ Earn accounts. The sale proceeds will fund the lender’s administrative costs over the next several months.