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  • Michael Bacina

US Ruling finds crypto-assets held by Celsius to be property of the company

Updated: Jan 9


A potentially significant ruling has been made in the Celsius Network's bankruptcy proceedings finding that customers do not own the tokens the subject of those proceedings. The ruling impacts about 600,000 accounts that held assets valued at US$4.2 billion when Celsius filed for Chapter 11 bankruptcy protection.


The bankruptcy trustees had sought orders from the Court permitting the sale of stablecoins held by the company, and as part of that the published decision, the Court found that the assets held by the company were owned by the bankrupt company, and not customers themselves.


The Terms of Use were clear, saying:

you grant Celsius . . . all right and title to such Eligible Digital Assets, including ownership rights, and the right, without further notice to you, to hold such Digital Assets in Celsius’ own Virtual Wallet or elsewhere, and to pledge, re-pledge, hypothecate, rehypothecate, sell, lend, or otherwise transfer or use any amount of such Digital Assets ... in Celsius’ full discretion.

The trustees:

assert[ed] that ownership of the Earn Assets is an issue of contract interpretation and that the Terms of Use constituted a valid and enforceable contract between Celsius and its Account Holders

A number of interested parties made objections and submissions, including over a dozen US states and Celsius customers (with petitions of hundreds of signatures submitted). Those objecting sought to attack the contract, raising various arguments including that:

  • There were oral variations of the contract by Mr Mashinsky;

  • The description of "loans" by customers meant that legal title to the crypto had not moved;

  • That the contract lacked consideration;

  • The transfer of assets was obtained via lengthy and confusing terms and conditions; and

  • If a transfer of asset ownership had occurred, there would have been taxable events for customers.

The Court started from first principles which, under New York law, rendered the Terms of Use as a valid 'clickwrap' contract which 99% of the customers had consented to be bound by when they used the Celsius platform. The Court went on to find the Terms were "clear and unambiguous" and:

The Court finds that Account Holders understood that they were assenting to a contract governed by the Terms of Use even if the Account Holders chose to read some or none of the provisions

On the question of loans the Court said:

To read the Terms of Use such that “loan” overrides the unequivocal language transferring title and ownership of assets deposited into Earn Accounts to Celsius would be to read the Transfer of Title Clause out of the contract entirely. As the Committee notes, “it is a bedrock principle of contract interpretation that courts should not adopt an interpretation of a contract that has the effect of rendering at least one clause superfluous or meaningless, but rather, to the extent possible, should seek to read contractual provisions in harmony.”

And as a result the Court found there was a valid contract between Celsius customers and Celsius and that the contract terms unambiguously transferred all right and title of digital assets to Celsius. The Court specifically did not rule on any claims customers might make against the company or Mr Mashinsky relating to fraud, and the decision is not arising from a fully litigated hearing, so it should be kept in that context. This decision is not likely to have any bearing on any FTX cases, as the FTX terms and conditions expressly did not transfer the ownership of customer assets. Many in the crypto world have been pressing for exchanges to show "proof of reserves" following the collapse of Celsius and FTX to give customers comfort that their assets are in fact held by the exchange.


The decision is interesting as it adds to the growing body of caselaw which recognizes that crypto-assets are both property, and are capable of being held and transferred as property, and to giving some guidance as to other insolvency situations which must deal with digital assets. It also serves as a reminder to users to read the terms and conditions they are agreeing to when putting money on the line.


The decision is here:


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