Celsius’ retail borrowers finally have an answer on who owns the cryptocurrency they deposited into Celsius in exchange for a loan from Celsius – spoiler alert: on November 13, 2023 the bankruptcy court held that Celsius’ terms of service “clearly and unambiguously” gave Celsius ownership of retail borrowers’ cryptocurrency. The bankruptcy court’s decision follows its January 2023 decision which similarly held that the cryptocurrency of Celsius’ “Earn” customers also belonged to Celsius because the terms of service similarly unambiguously granted Celsius title ownership.
Executive Summary
The liquidity-fueled lull in restructuring activity provides both an interesting historical echo of the late 1990s and a useful opportunity for market participants to take note of a deceptively interesting opinion in Giuliano ex rel. Consolidated Bedding, Inc. v. L&P Financial Services Co. (In re Consolidated Bedding, Inc.), Case No. 19-50727, 2021 WL 2638594 (Bankr. D. Del. June 25, 2021) (Shannon, J.).
When it comes to offsets, bankruptcy law provides for two distinct remedies: (1) setoff and (2) recoupment.
Setoff allows a creditor to reduce the amount of prepetition debt it owes a debtor with a corresponding reduction of that creditor’s prepetition claim against the debtor. The remedy of setoff is subject to the automatic stay, as well as various conditions under § 553 of the Bankruptcy Code — including that it does not apply if the debts arise on opposite sides of the date on which the debtor’s case was commenced.
In early November, the Ninth Circuit held in In re New Investments, Inc. that a debtor was required to “cure” defaults to an agreement using a post-default interest rate, overturning its prior, decades-old decision In re Entz-White Lumber & Supply, Inc., which had held that a debtor could cure agreements at pre-default interest rates.
Background
On June 30, 2016, Congress passed and President Obama signed into law a new piece of federal legislation that will govern the restructuring of U.S. territories: Public Law No: 114-187. Although not limited to the Commonwealth of Puerto Rico, enactment of the new law, entitled the Puerto Rico Oversight, Management, and Economic Stability Act or “PROMESA,” represents a bipartisan achievement in the context of a worsening fiscal crisis in Puerto Rico.
Creditors seeking to file an involuntary petition against a debtor may want to consider doing their due diligence before using it as a tool in their ongoing disputes with a debtor.
In a recent decision, the United States District Court for the Southern District of Texas affirmed the bankruptcy court’s rejection of the cost methodology to value the right to use common amenities in a condominium development and, in the process, bolstered the notion that bankruptcy courts have discretion in determining what valuation methodologies are appropriate under the facts and circumstances of a particular case.
The United States Court of Appeals for the Seventh Circuit recently held that numerous forbearances by a lender that allowed a single asset real estate borrower to stave off bankruptcy for four years provided value in the context of a constructive fraudulent transfer action. 1756 W. Lake St. LLC v. Am. Chartered Bank (In re 1756 W. Lake St. LLC), Case No. 14-1869 (7th Cir.