What happened
On 4 January 2023, Chief US Bankruptcy Judge Martin Glenn issued a 45-page Memorandum Opinion and Order Regarding Ownership of Earn Account Assets, ECF Doc. 1822, in the Celsius Network Chapter 11 cases (filed 13 July 2022, US Bankruptcy Court, Southern District of New York, lead case No. 22-10964 (MG), jointly administered).
The holding has two steps. The Terms of Use formed a valid, enforceable clickwrap contract under New York law, and later versions validly modified it. Those terms then unambiguously transferred title and ownership of Earn assets to Celsius on deposit. Earn assets are therefore property of the estates as of the petition date, and Earn customers are unsecured creditors rather than owners of the coins their accounts showed.
What it changes
It answers, for this company, the question left open when Celsius stopped withdrawals in June.
The reasoning turns on the Transfer of Title Clause, under which customers "grant Celsius ... all right and title to such Digital Assets, including ownership rights." Objectors argued that Celsius's pervasive use of the word "loan" made the contract ambiguous. The court refused: a transfer of title and a loan are not mutually exclusive, and reading "loan" as controlling would leave the Transfer of Title Clause with nothing to do.
Then the sharpest part. Even read as a plain loan, the opinion says, the outcome holds. A loan creates a debtor-creditor relationship, and absent a perfected security interest the customer holds only an unsecured claim.
A custodial balance is a contractual claim against a counterparty, and the contract, not the number on the screen, decides whether you are an owner or a creditor. Bankruptcy then sorts people by legal category rather than by fairness or by what the marketing said. Yield is the tell: someone has to be doing something with the asset to pay you, and that something is usually a transfer of title.
What it does not change
The order is narrow, and this is where the summaries go wrong. It expressly does not determine ownership of assets in the Custody Program, Withhold Accounts or Borrow Program, and it does not decide any individual account holder's contract defences: fraudulent inducement, unconscionability and state securities law claims are all reserved.
The large numbers in circulation are not what it moves. Earn accounts held crypto with a market value of approximately 4.2 billion dollars as of 10 July 2022, across approximately 600,000 Earn accounts (Mashinsky first-day declaration, ECF Doc. 23). What the order authorises Celsius to sell is the stablecoins in those accounts, valued at 23 million dollars as of September 2022.
It says nothing about coins held under keys their owner controls. Those are not a claim against anyone, have no terms of use, and cannot become property of a third party's estate. It is also a New York contract-law reading of one company's contract, not a finding about every custodian: a different contract can produce a different answer.
Context
Celsius adopted eight versions of the Terms of Use between February 2018 and Version 8, effective 15 April 2022, the controlling document here. Version 1 contained no ownership clause. Versions 2 to 4 let Celsius pledge, rehypothecate, lend and sell deposits "with all attendant rights of ownership", but stopped short of transferring title. Version 5 introduced the Transfer of Title Clause.
The obvious objection is that nobody knowingly agreed. The record says otherwise. Celsius required affirmative acceptance of Version 6 through an in-app pop-up, a checkbox and an "Agree" button, and suspended accounts that had not accepted after two weeks. The court found that met the "clear and conspicuous" standard. The story that circulates, that customers were bound by terms they never clicked, is not what happened here. They clicked.
The same question sits unanswered on other documents, including at FTX. What stays open here is what the reserved defences produce, who owns the assets in the other three programs, and how much the estates can return.