What happened
On 9 November 2023, Chief US Bankruptcy Judge Martin Glenn issued a Corrected Memorandum Opinion, ECF Doc. 4089, holding that the collateral customers posted to Celsius's Borrow Program is property of the estates. It resolves the last of the four deposit programs in the Celsius Chapter 11 cases (No. 22-10964 (MG), Bankr. S.D.N.Y., petition filed 13 July 2022). Same company, same judge, same estate, four results:
| Program | The clause about title | Outcome |
|---|---|---|
| Custody | title "shall at all times remain with you" | held by the customer |
| Earn | "all right and title ... including ownership rights" | estate property |
| Withhold | settled, not decided | 15 percent in kind, 85 percent an Earn claim |
| Borrow | title passes "on the basis of an outright sale" | estate property |
What it changes
It completes an answer January's Earn opinion began. The variable is whether the contract moved legal title, because section 541 of the Bankruptcy Code sweeps into the estate every legal and equitable interest the debtor holds when it files. Move title on deposit and the coins are the company's, leaving the customer a claim. Leave it alone and there is nothing to sweep.
Earn and Borrow used the same grant of "all right and title ... including ownership rights", and both lost. Borrow carries the sting: the user posted collateral and expected it back on repayment, and the terms recharacterised it as a sale. Custody said the opposite, added a no-rehypothecation covenant, and held.
Then the half that is easy to miss. Winning on title only gets you to the starting line. The Custody settlement (ECF Doc. 2291, 21 March 2023) sorts holders into three tiers drawn by preference law, not by account size. Assets never in Earn or Borrow come back in full, as do assets moved into Custody within 90 days of the petition and worth under $7,575 at transfer, since below the de minimis threshold in 11 U.S.C. 547(c)(9) a transfer in a non-consumer-debt case cannot be avoided. Everyone else may elect 72.5 percent, half up front and half at plan resolution, forfeiting 27.5 percent for a release of the estate's preference claims. Employees and insiders are excluded, and the settlement also clears an approximately 6 percent shortfall across all coins.
Moving coins into the safe program weeks before the collapse is what made those holders preference defendants. Title governs whether it is yours. Preference law governs whether you get to keep it.
What it does not change
It does not make custodial accounts safe, and it is not a ruling that crypto left with a custodian is bankruptcy remote. It is New York contract construction of one company's clickwrap, not a property rule for digital assets, so different terms elsewhere produce a different answer. Nor does it decide whether Celsius commingled in practice: Custody wallets were segregated, which is why the argument was available at all, and there was still an approximately 6 percent shortfall to clear.
It leaves untouched the defences the Earn opinion reserved, including the state securities law claims. And it reaches nothing held under keys their owner controls, which are not a claim against anyone and cannot become property of somebody else's estate.
Context
Celsius stopped withdrawals on 12 June 2022 and filed on 13 July. The chronology after that runs backwards from how it is usually told. Custody went first, from the bench on 7 December 2022 (ECF Doc. 1767), before the Earn opinion, and narrowly: an authorisation to return Pure Custody and small Transferred Custody assets, framed as "there is no preference ... the assets should be returned to them", not a decree about who owns digital assets. The Earn opinion followed on 4 January 2023, the Custody settlement on 21 March, the Withhold settlement on 28 March (ECF Doc. 2509).
The programs were nowhere near the same size: approximately 4.2 billion in Earn on the same date (first day declaration). Borrow covers approximately 23,000 retail loans, 765.5 million of collateral, and Class 2 retail borrowers voted 96.33 percent by amount to accept a settlement offering set-off treatment by default plus an election to repay and receive bitcoin or ether equal to the amount repaid, which is not the collateral. What the reserved defences produce, and what these claims are finally worth, is open.