In other words, according to Celsius’ lawyers, coins in the Earn program are the property of the bankruptcy estate, and depositors who thought they were still the owners of these coins are just general unsecured creditors. The extent to which this came as a shock to depositors is reflected in dozens of outraged and disbelieving letters that have been filed in Celsius’ bankruptcy case.
Coins in custody program
In particular, a very small subset of coins on the Celsius platform in the “Custody” service (about 4% of the total coins on the exchange, worth about $180 million at the time of filing) may be subject to differential treatment in the bankruptcy case. A little history is necessary for context: As explained in detail here, in 2021, Celsius was subject to multiple cease-and-desist actions by state regulators, each of which alleged that Celsius was illegally offering unregistered securities through its Earn program. After initial opposition, in April 2022, Celsius unveiled the new escrow program where depositors could store digital assets but would not earn rewards or financial compensation. New transfers made by non-accredited investors in the US on or after April 15 will automatically go into custody. (Coins deposited by non-accredited US investors prior to April 15 were transferred to the Earn program and could remain there until moved by the depositors.)
The status of coins in the escrow account is likely to come to a head in fairly short order, as hundreds of escrow depositors have organized into an ad hoc committee and retained counsel to pursue this matter. If they succeed in obtaining a judgment that their coins do not belong to the bankruptcy estate, they will be in a good position to demand the immediate return of those coins.
Coins in the Earn program
So where does this leave depositors in the Earn program – particularly non-accredited investors who arguably should never have had access to unregistered securities in the first place? Should they join treatment as general unsecured creditors who must wait months or years for a distribution likely to be in fiat currency and (even worse) based on the diminished value of their crypto assets on the date of the bankruptcy filing?
Alternatively, Earn Program depositors may seek to rescind their transfers of coins to Celsius based on either the securities laws applicable to non-accredited investors or on a theory of fraudulent inducement. (A cursory search of YouTube reveals numerous examples of statements by Celsius executives that appear to be inconsistent with Celsius’ terms of service.)
While escrow account holders are likely in a stronger position to exclude their coins from the estate of the estate, depositors in the Earn program may also have viable arguments to retain ownership of their crypto assets, although further fact-finding and legal analysis will be required.
 Filing a bankruptcy petition creates an “estate,” which consists of all legal or equitable interests of the debtor in property from the beginning of the case. See 11 USC § 541.
 Of course, many of them will likely face preference lawsuits down the road. Pursuant to 11 USC § 547, the debtor-in-possession may recover payments to creditors due to prior debts within 90 days prior to the bankruptcy filing. If coins in the Earn program are considered to be the property of the estate, or loans from depositors to Celsius, the transfer of coins to depository will be payment of debts to creditors. It is no coincidence that Celsius filed for bankruptcy on the 89th day after the escrow accounts were created – the company and its highly competent bankruptcy attorney ensured that any coins transferred from the Earn program to escrow would fall within the grace period.
 Veleron Holding, BV v. Stanley, 117 F. Supp. 3d 404, 452 (SDNY 2015).
 EBC I, Inc. v. Goldman, Sachs & Co., 832 NE2d 26 (NY2005).
 See e.g. Merrill Lynch Realty Assocs., Inc. v. Burr140 AD2d 589, 593, 528 NYS2d 857, 860 (1988) (explaining that New York’s law of general obligations does not “bar the enforcement of a subsequent oral agreement to modify or cancel a contract where . . . the contract does not contain an express prohibition against oral modification”).