Users Angry at Crypto Entity’s Recent Actions May Face Obstacles Before Accountability

On Sunday, June 12, a major cryptocurrency platform that accepts deposits from individuals and uses their deposits to make crypto loans, promising high yields to depositors, announced that it would be “pausing” all withdrawals and transfers for users. Some panicked users have begun calling for class actions against the platform, Celsius, but they may face significant challenges due to a forced arbitration clause in its terms of use. According to a post on Celsius’ Medium page, the pause is intended to allow Celsius to stabilize liquidity so it can meet its withdrawal obligations. The announcement, which prompted a market-wide cryptocurrency selloff and rumors of impending insolvency, comes in the midst of a larger downturn in cryptocurrency values.

For most users harmed by the pause, taking Celsius to court may be lost because its Terms of Use, like those of many other corporations, includes a forced arbitration clause and prohibits users from banding together in class actions. According to the terms, aggrieved users must take any claims they have against Celsius to private arbitration rather than a judge and jury and they cannot join their claims with others even if they suffered similar harms. The terms allow for individual actions that are small enough for small claims court. In the event that Celsius does become insolvent, its terms also state that users’ funds “may not be recoverable, and [users] may not have any legal remedies or rights in connection with Celsius’ obligations to [users].”

The forced arbitration clause and class action ban are relatively recent additions to Celsius’ terms of service, being added around August 2021. Celsius amended its terms to include the clauses around the time that several state regulators began investigating it and similar platforms. On September 17, 2021, New Jersey issued a cease and desist against Celsius ordering it to stop offering several products; Texas filed a notice seeking a hearing on whether or not to issue a cease and desist; and Alabama issued a demand to Celsius to show why it should not be barred from operating. The next month, New York ordered Celsius to provide information on its operations as part of the state’s crackdown unregistered cryptocurrency lending platforms.