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Judge Martin Glenn of the US Bankruptcy Court for the Southern District of New York ruled last week.
Celsius network Bankruptcy cases dealing with whether a customer’s deposit on a virtual currency exchange or platform is the property of the debtor or the customer. The answer, of course, depends on the terms and conditions governing the account in question. In this case, the court determined that the terms clearly and unequivocally stipulate that the ownership of the cryptocurrency assets deposited in “Earn Accounts” is owned by Celsius.
Such as the Celsius network.No. 22-10964 (MG), 2023 WL 34106 (Bankr. SDNY 4 January 2023).
Background
Celsius offered its customers a range of products, including Earn Accounts, which offer high interest rates on deposited crypto assets. In November 2022, Celsius filed a motion seeking a determination that Earn Accounts’ assets are property of real estate rather than customer property. Opposed by multiple state regulators, multiple Earn Account customers, and the United States Trustee. In support of that move, Celsius said that when a customer agrees to the terms and conditions of his Earn Account, both parties will sign a binding agreement that the depositor will transfer ownership of the deposited assets to her Celelsia. Claimed to have a deal. Opponents primarily argued that the terms of use were vague and that it was premature for the court to determine the owners of the assets.
court judgment
The Court held that the Earn Account Terms and Conditions constituted a binding and express agreement between Celsius and the Earn Account customers and that, pursuant to the Terms and Conditions, the Earn Account assets were the property of the Estate. and upheld this claim. Under New York State law governing terms and conditions, a contract must consist of (1) an offer and acceptance (also known as mutual agreement), (2) consideration, and (3) an intent to be bound. not. The Supreme Court has ruled that all three factors are met.
The terms of use are a so-called “clickwrap” agreement. That is, the user indicates consent by clicking a button to accept (or imply acceptance of) the terms, but the user does not necessarily have to display the terms. While the court sympathized with “the frustrations an account holder may have if he did not read or understand certain terms of the Terms of Service,” New York law does not allow accepted “clickwrap” contracts. has clearly stipulated that constitutes mutual assets.
The Court further held that the terms of the Terms of Service, which stipulates that customers “grant Celsius all right and title to such digital assets, including ownership rights,” of cryptocurrencies deposited into their Earning Accounts are clear and unambiguous. , Celsius acquires account assets.
The Court held that Earn Account customers were liable for breach of contract, fraud, improper communication, unscrupulous terms and conditions, or any other theory of liability related to misleading customers and subsequent misuse of Earn Account assets. You acknowledge that you may make a claim against Celius. However, customers should pursue these claims separately from the question of whether the cryptocurrency assets in the Earning Account are the property of the assets.
The Court’s rulings are expressly limited to Earn Accounts and do not determine ownership of assets associated with other types of Celsius accounts or programs, such as Celsius Custody Programs, Withhold Accounts and Borrow Programs. .
gist and meaning
This ruling does not resolve the general issue of ownership of all deposits in virtual currency accounts. The Court has clearly ruled on the facts at hand regarding the Earn Account. This question is likely to be repeated with respect to other cryptocurrency accounts. In fact, two sets of clients recently filed adversarial complaints in his FTX bankruptcy proceedings seeking declaratory judgment that certain assets of FTX are the property of the clients and not the property of the estate. Plaintiffs allege that the applicable FTX Terms of Service expressly stipulate that all digital assets are owned by customers and not transferred to FTX. The Celsius decision could serve as a guide to how bankruptcy courts resolve these and other issues regarding whether customer deposits are property of bankrupt cryptocurrency companies. I have.
Customers should carefully review the terms and conditions of the products used. Courts apply a clear contract analysis to these terms, regardless of whether they are misleading or deceptive. Such plain language is likely to be decisive in analyzing the processing of potential customer complaints, and seemingly similar customer complaints may be treated differently according to different terms and conditions. there is.
The content of this article is intended to provide a general guide on the subject. You should seek professional advice for your particular situation.
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