Depositing Cryptocurrency Assets: A Cautionary Tale on Clickwrap Agreements

Mike Richardson

Share Post:

Earlier this year, a bankruptcy court in the Southern District of New York issued a startling ruling in the bankruptcy case of In re Celsius Network LLC, et al., Case No. 22-10964 (MG).  The dispute involved cryptocurrency owners who deposited their assets (such as stablecoins, non-fungible tokens (NFTs), central bank currencies, and security tokens) into Celsius’s “Earn Accounts” that allowed Celsius to use those funds to generate yields across various “on-chain” and “off-chain” investment strategies.  At the time Celsius filed bankruptcy, there were more than 600,000 Earn Account holders affected. Their assets totaled approximately $4.2 billion. 

A large-scale dispute arose over who could claim the assets in the Earn Accounts as their property.  If the bankruptcy court rules that they are the account holders’ property, then those individuals and entities will fare quite well in the bankruptcy proceedings from a distribution standpoint.  If they are not the account holders’ property, then they are Celsius’s property (and its bankruptcy estate).  As property of the estate, assets are used to pay creditors at the front of the priority line – which does not include the account holders.  Rather, that account holders are general unsecured creditors, which often means pennies on the dollar (or less) of the claim amount.   

On January 4, 2022, the bankruptcy court issued a ruling that held, in part, that the Earn Accounts were property of Celsius’s bankruptcy estate, and therefore Celsius could sell those assets to pay for administrative expenses, like legal fees.  In making this ruling, the bankruptcy court analyzed the enforceability of so-called “clickwrap” agreements in which users manifest assent by clicking a button confirming that they accept the terms.  Clickwrap agreements do not necessarily require the account holder to actually view the terms.  In most jurisdictions, clickwrap agreements are valid and enforceable contracts.

Celsius’s account holders were required to click through Terms of Use that included the following language:

In consideration for the rewards earned on your Account and the use of our Services, you grant Celsius the right, subject to applicable law, without further notice to you, to hold the Digital Assets available in your account in Celsius’ name or in another name, and to pledge, re-pledge, hypothecate, rehypothecate, sell, lend, or otherwise transfer or use any amount of such Assets, separately or together with other property, with all attendant rights of ownership.


In the event that Celsius becomes bankrupt, enters liquidation or is otherwise unable to repay its obligations, any [Assets] used in the Earn Service or as collateral under the Borrow Service may not be recoverable, and you may not have any legal remedies or rights in connection with Celsius’ obligations to you other than your rights as a creditor of Celsius under any applicable laws.

There are a multitude of colorable arguments supporting a determination that these clauses are unenforceable as a matter of state and federal law, including that (i) they lack consideration, (ii) they are unconscionable; (iii) they are ambiguous because they use terms like “loans” or “lending”; (iv) Celsius failed to uphold its fiduciary duties under the contract; (v) account holders lacked the requisite intent to transfer ownership; (vi) Celsius fraudulently misrepresented its product and finances; and (vii) Celsius operated illegally by violating the securities laws of several states.  Nonetheless, the bankruptcy court disagreed and held that these terms unambiguously transferred title and ownership of the Earn Accounts from account holders to Celsius, and that the account holders should have been aware that they were being bound by those terms.

It appears that disputes like this will play out again and again and the issue of who owns deposits in cryptocurrency accounts is unsettled.  What is clear from this initial ruling is that, in the cryptocurrency context, a bankruptcy court will enforce clickwrap agreements that may be unenforceable in other circumstances.  



Mike Richardson joined Milgrom & Daskam as a Partner in May 2022.  His practice focuses on litigation and bankruptcy matters.  He has represented parties on either side of real estate disputes, breach of contract actions, oil and gas disputes, fraudulent transfer claims, and breach of fiduciary duty claims.  Mike has also represented debtors, chapter 7 bankruptcy trustees, and other matters involving financially distressed parties reorganizing under chapter 11 of the U.S. Bankruptcy Code.

More Articles

Work-Life Balance

A D-Day Wake Up Call

Travel and reflection, particularly when it takes us out of our comfort zone, strengthens our ability to empathize with others, improves our self-awareness and helps us better understand our place in the world; both as humans and as lawyers. We return to our roles more informed and better able to connect with our community and serve our clients in an ever more challenging world.

Read More »
Business & Corporate Law

Navigating the SBA’s Collection Efforts on COVID-19 Loans

During the height of the COVID-19 pandemic, the Small Business Administration (SBA) launched various loan programs, such as the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program, to support businesses grappling with unprecedented economic challenges. These programs were lifelines for many, providing essential funds to keep businesses afloat. However, as we move forward, the SBA has started to collect on these loans, leading to new challenges and questions for borrowers.

Read More »
Business & Corporate Law

The Best-Laid Plans of Lawyers and Businessmen

As a transactional attorney, I focus my practice on helping clients plan for and react to business events much more so than I do on interpreting statutes or legislation. Sometimes, however, a statutory change or judicial ruling will have a wide-ranging—and retroactive—impact that is impossible to ignore.

Read More »