SHARE

November 10, 2022

Celsius Bankruptcy Court Tees Up Tentative Briefing Schedule to Hear Issue of First Impression: Are Keys and Digital Assets Property of the Estate?

You've Reached Your
Free Article Limit This Month
Register for free to get unlimited access to all Law.com OnPractice content.
Register Now

Are customers' digital assets held by exchange platforms in so-called "Custodial" and "Withhold" accounts property of the bankruptcy estate? This may be coined the golden question in the recent crypto bankruptcy chronicles, and at a status conference held Oct. 7, 2022, Bankruptcy Judge Martin Glenn of the Southern District of New York scheduled Dec. 7 and Dec. 8 as tentative dates to hear oral arguments on the issue.

Judge Glenn was largely on board with the joint stipulation and agreed briefing schedule ("Stipulation") submitted to the court by key parties to the case, including the debtors, the unsecured creditors committee, and the ad-hoc groups appearing on behalf of the Custodial and Withhold account holders. The proposed briefing schedule would bifurcate the litigation over the threshold legal question related to the Custodial and Withhold accounts into two separate phases:

  • Phase I: whether assets in the Custody and Withhold accounts are property of the Debtors' estates, including whether the Debtors' "Terms of Use" are unambiguous on the issue of ownership of such assets; and, if necessary
  • Phase 2: whether certain transfers of customer assets are subject to preference defenses under the bankruptcy code.

Once the Bankruptcy Court signs and approves the Stipulation, the Debtors within 14 days must submit sworn declarations addressing certain questions germane to the concept of ownership of digital assets held by exchange platforms, including:

  • how and when the Custody and Withhold wallets were created;
  • whether the Custody and Withhold wallets have only ever held Custody and Withhold coins, respectively;
  • whether the Custody and Withhold wallets include digital coins that have been designated as pledged collateral; and
  • how coins were transferred in and out of Custody and Withhold wallets.

Over the next weeks, the crypto community will see the oft-quoted maxim "not your keys, not your coins" put to test. Will it steadily hold true in bankruptcy? Or will the court find the merits of the threshold issues warrant a new and widely accepted maxim?

ALM expressly disclaims any express or implied warranty regarding the OnPractice Content, including any implied warranty that the OnPractice Content is accurate, has been corrected or is otherwise free from errors.

More From Greenberg Traurig

Proposed UCC Amendments to Article 12 Shed New Light on Transacting and Securing Interests in Digital Assets

By John B. Hutton III Greenberg Traurig December 07 , 2022

As we know it, the emerging practice of transacting in digital assets has developed into a mainstream fragment of the financial market ecosystem.

Certain Ukrainian and Afghan Parolees Employment Authorized Incident to Parole

By Linnea Porter Greenberg Traurig December 07 , 2022

Effective Nov. 21, 2022, USCIS announced that certain Afghan and Ukrainian beneficiaries paroled into the United States are employment authorized incident to parole.

Trade Secret Law Evolution Podcast Episode 51: The Sixth Circuit Analyzes Key Concepts in Trade Secret Law in Affirming Major Jury Verdict

By Jordan D. Grotzinger Greenberg Traurig December 02 , 2022

You are invited to listen to Episode 51 of Greenberg Traurig’s Trade Secret Law Evolution Podcast, "The Sixth Circuit Analyzes Key Concepts in Trade Secret Law in Affirming Major Jury Verdict."

More From Cryptocurrency

Proposed UCC Amendments to Article 12 Shed New Light on Transacting and Securing Interests in Digital Assets

By John B. Hutton III Greenberg Traurig December 07 , 2022

As we know it, the emerging practice of transacting in digital assets has developed into a mainstream fragment of the financial market ecosystem.

City of Atlanta Adopts New Protections for Criminal History Status, Gender Expression

By Emily S. Borna Jackson Lewis P.C. December 07 , 2022

The Atlanta City Council has amended the City of Atlanta Anti-Discrimination Ordinance to extend protections to citizens on the basis of criminal history status and gender expression in employment, housing, and public accommodations.

Trade Secret Law Evolution Podcast Episode 51: The Sixth Circuit Analyzes Key Concepts in Trade Secret Law in Affirming Major Jury Verdict

By Jordan D. Grotzinger Greenberg Traurig December 02 , 2022

You are invited to listen to Episode 51 of Greenberg Traurig’s Trade Secret Law Evolution Podcast, "The Sixth Circuit Analyzes Key Concepts in Trade Secret Law in Affirming Major Jury Verdict."

Featured Stories
Closeclose
Search
Menu

Working...