Business Law

In re Celsius Network LLC, 647 B.R. 631 (Bankr. S.D.N.Y. 2023)

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The following is a case update written by Corey R. Weber, a partner at BG Law LLP, analyzing a recent decision of interest:


The United States Bankruptcy Court for the Southern District of New York held that cryptocurrency assets held in accounts deposited with the debtors constituted assets of the debtors’ bankruptcy estates.  In re Celsius Network LLC, 647 B.R. 631 (Bankr. S.D.N.Y. 2023).

To view the opinion, click here.


Debtors Celsius Network LLC and related debtors (the “Debtors”) had approximately 600,000 customer accounts that held cryptocurrency assets with a market value of approximately $4.2 billion.  There was a dispute over whether the cryptocurrency assets in the accounts were owned by the Debtors or by the customer account holders.  The Debtors filed a motion seeking to sell approximately $18 million in “stablecoins” held in the accounts in order to fund the operations of the bankruptcy estates.  Stablecoins have been defined as a type of cryptocurrency “in which the price of the coin is pegged to another asset, most commonly fiat currency, exchange-traded commodities, or other cryptocurrencies.”  See Albright v. Terraform Labs, Pte. Ltd., 2022 WL 16985806at *1 (S.D.N.Y., Nov. 15, 2022).  Following the filing of oppositions to the motion, the Debtors filed an amended motion also seeking determinations that the Debtors’ terms of use (the “Terms of Use”) provide that the cryptocurrency assets are property of the estates and that there is a rebuttable presumption that the Terms of Use are an enforceable contract subject to contract-related defenses.

The Debtors had eight version of the Terms of Use and introduced uncontroverted evidence that 99.86% of the account holders accepted the Terms of Use for version 6 or higher.  Version 8 was a “clickwrap” contract under which the Debtors held all right and title to cryptocurrency assets, including ownership rights.

The Office of the United States Trustee filed a limited objection arguing that the sale of stablecoins should not be permitted because the Debtors did not provide sufficient evidence that they own the stablecoins given the commingling of assets.  The official committee of unsecured creditors also filed a limited objection based on issues as to whether the Terms of Use are binding on customers that may not have accepted the Terms of Use.  Several States objected based on issues of ownership, violations of state securities laws, the need for the procedural safeguards of adversary proceedings and contested issues with the Terms of Use.  Over twenty individual creditors objected on due process grounds and on the further grounds that the Terms of Use were ambiguous, that the Debtors made statements constituting oral modifications of the Terms of Use and that determining ownership was premature because the Debtors’ business was a Ponzi scheme and the Terms of Use are void.  In addition, the creditors also asserted contract-based defenses.

The court determined that the cryptocurrency assets constitute property of the estates and held that the Debtors were authorized to sell the stablecoins outside of the ordinary course of business.


The court cited to 11 U.S.C. § 541, which defines property of the estates as including all legal or equitable interests of the Debtors as of the petition date, and then focused its attention on the interpretation of the Terms of Use under New York law.  First, considering whether customers assented to the Terms of Use, the court stated that “[g]iven consumers’ passive role in negotiating many electronic contracts, the issue of mutual assent often turns on whether a consumer should have been aware that they were being bound by the relevant terms” and that “courts generally evaluate the method of manifesting acceptance and the conspicuousness of the terms that were purportedly accepted.”  Citing to the evidence presented through declaration testimony, the Court determined that the Terms of Use are a “clickwrap” agreement, that New York courts accept clickwrap agreements (citing to Meyer v. Uber Techs., 868 F.3d 66, 75 (2nd Cir. 2017)) and that the account holders entered into a contract through the clickwrap agreement “which requires a user to manifest assent by clicking a button confirming that they accept the terms, or a button that implies that they have accepted the terms, but do not necessarily require the user to view the terms.”  Addressing the consternations with clickwrap agreements, the court stated that it “empathizes with the frustrations Account Holders may feel if they did not read or understand the specific terms of the Terms of Use.  Frankly, though, the rules provide needed certainty and predictability required for modern commerce in the digital era.” 

Based on the determination that the Terms of Use were a clickwrap agreement, the court determined that “the Terms of Use formed a valid, enforceable contract between the Debtors and the Account Holders, and that the Terms unambiguously transfer title and ownership of Earn Assets deposited into Earn Accounts from Account Holders to the Debtors.”  The court held that the account holders have unsecured claims in amounts subject to determination through the claims allowance process. 

As to objections by creditors that there were oral modifications to the Terms of Use, the court determined that the claimed modifications were not supported by evidence.  The court further determined that “90% of Account Holders representing 99% of the Earn Assets” assented to versions 6 or higher of the Terms of Use, that after version 5, each version grants the Debtor all right and title, including ownership rights, and that “title and ownership of all Earn Assets unequivocally transferred to the Debtors and became property of the Estates on the Petition Date.”  As to the argument that the Terms of Use referred to the customers providing the cryptocurrency assets as a loan to the Debtors, the court determined that even if the amounts were loans, the account holders would still be unsecured creditors.

The court stated that, as to the issues raised as to statements by the Debtor’s CEO, and as to potential violation of securities laws, fraudulent inducement and fraud that potentially render the Terms of Use as void, “[t]hese parties could have colorable defenses to contract formation as individuals and as a group” but that “as a prerequisite to those claims, the Court must first establish that a contract was formed and must interpret the contract terms” and that “[c]reditors will have every opportunity to have a full hearing on the merits of these arguments during the claims resolution process.”


This opinion is likely to be one of many opinions in cryptocurrency-related bankruptcies that make determinations as to whether cryptocurrency assets held for customers are property of the estate.  Given that the broad determination as to assets held in customer accounts was made based on a motion in the main bankruptcy case, without the protections of an adversary proceeding and ability to obtain discovery, parties may raise issues as to due process. 

For the creditors that thought that they were maintaining their cryptocurrency assets with the Debtors for safekeeping, the opinion is undoubtedly frustrating as people routinely click the button on websites accepting terms of online agreements without actually reading the terms or thinking further about issues that may result.  Just as with the Second Circuit, the Ninth Circuit has stated that “[c]ourts routinely find clickwrap agreements enforceable” (see Oberstein v. Live Nation Entertainment, Inc., 2023 WL 1954688, at *5 (9th Cir. Feb. 13, 2023)) and has explained that clicking the “I agree” button manifests consent.  See Berman v. Freedom Financial Network, LLC, 30 F.4th 849, 856 (9th Cir. 2022).  While creditors undoubtedly believe that the assets held by the Debtors were the creditors’ separate funds held in trust, from the court’s opinion there does not appear to have been a viable theory presented that the funds were held in trust.  While the court focused on the Debtor’s Terms of Use and contract interpretation, the key issue is that under each theory presented by creditors and objecting parties (e.g., based on fraud, recission, Ponzi scheme or contract), the result is the same that the creditors are unsecured creditors.  Only a viable theory that the customer funds were held in trust by the Debtors would change the substantive outcome.  Due process issues also remain.  This case is a reminder that cryptocurrency assets have far greater risks than traditional investments or cash held in FDIC-insured banks based on the lack of regulation and enforcement in the cryptocurrency industry and a reminder that clicking “I agree” on a website may have far-reaching consequences.

This review was written by Corey R. Weber (, a partner at BG Law LLP, a member of the ad hoc group and a past chair of the CLA Business Law Section, with editorial contributions by the Hon. Meredith Jury (United States Bankruptcy Judge, C.D. Cal., Ret.), also a member of the ad hoc group. Thomson Reuters holds the copyright to these materials and has permitted the Insolvency Law Committee to reprint them. This material may not be further transmitted without the consent of Thomson Reuters.

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