Following the freezing of customer funds, disgruntled Celsius customers are considering a class action lawsuit against the cryptocurrency lender.
Some platform users have reported being unable to withdraw funds after being forced into “HODL mode” indefinitely. HODL mode is used to prevent withdrawals within 24 hours of account deactivation and is a feature primarily used to protect user funds in the event of a security breach.
With Celsius halting withdrawals indefinitely on Sunday without an update on when they would resume, some users are now considering class action.
Crypto YouTuber Ben Armstrong, better known as BitBoy, the leading proponent of the class action lawsuit, tweeted: “Today we will begin the process of filing a class action lawsuit against @Celsius Network and Alex @Mashinsky.”
BitBoy’s fight with Celsius comes after figure out from your account representative that while there is enough money in your account to repay the borrowed funds, that money cannot be used. More funds must be deposited to repay the loan.
The premise of the legal action is the question of whether it is legal for an institution to freeze funds without notice. New Jersey-based Celsius has already had a run-in with local securities regulators. He was required to appear at a hearing justifying why he should be allowed to continue offering his products in the state.
Now, despite assurances that user funds are safe and earn interest, customers fear the company will go bankrupt and treat its customers like unsecured creditors in bankruptcy. This would cause user funds to be lost without any legal recourse.
Difficult application of the law.
Be[In]crypto contacted Ana Ojeda, a Venezuelan lawyer specializing in blockchain technology, to determine the merits and likelihood of success of a class action lawsuit.
“Indeed, the collective complaint would make a lot of sense right now, but it would be difficult to apply and execute due to the current circumstance of Celsius, where they cannot be qualified as truly bankrupt because they have not initiated this procedure,” she said.
In other words, early class action, while sensible on the surface, is unlikely to succeed because Celsius has not yet filed for bankruptcy. Ojeda advises clients considering class action not to underestimate the power of a single complaint.
Who is BitBoy?
BitBoy is a crypto influencer known for pump and dump schemes involving altcoins. He has significant influence on YouTube, with 1.45 million subscribers and a net worth of $28 million. His substantial subscriber base and financial means could see him spearhead and garner support for the case against Celsius.
It remains to be seen whether the company will survive a potential class action lawsuit. He wrote in a memo to his community: “Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, exchanges, and transfers between accounts” to put the company in a “better position to honor, over time, your retirement obligations.”
The company promises to restore withdrawals as soon as possible.
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