August 23, 2022, US Bankruptcy Court for Southern New York – Celsius Network Limited and Celsius Network LLC (“Debtors”) bring an adversary proceeding against Prime Trust, LLC (“Defendant”) to seek turnover and transfer of crypto assets worth allegedly approximately $17 million at recent prices.

Celsius is a cryptocurrency platform that, at relevant times, offered rewards to its users who transferred their crypto assets to Celsius through the “Earn” program. Users in the Earn program allegedly granted Celsius all rights and titles to the crypto assets from the time the user transfers the assets until the assets are transferred back to the user.

Celsius allegedly had certain contractual arrangements with its New York and Washington users, and Prime Trust, which provided that Prime Trust would hold crypto assets for Celsius users residing in New York and Washington. This arrangement granted Celsius authority to direct Prime Trust with respect to these crypto assets. Celsius alleges that Prime Trust’s duties were ministerial in nature, and Prime Trust did not take any ownership rights in the crypto assets.

In June 2021, Prime Trust purported to terminate its relationship with Celsius and indicated its desire to return the crypto assets it was holding to Celsius. Thereafter, Celsius allegedly directed Prime Trust to transfer certain crypto assets at issue to Celsius. Prime Trust complied in part, transferring crypto assets worth approximately $119 million (at recent prices) to Celsius. However, the complaint alleges that Prime Trust has allegedly “failed and refused” to transfer to Celsius approximately $17 million worth of crypto assets (at recent prices) that Celsius allegedly instructed Prime Trust to deliver.

Celsius contends that these crypto assets are property that Celsius could allegedly “use, sell, or lease” under section 363 of the Bankruptcy Code, and are not of inconsequential value or benefit to Celsius’ estate. Celsius pleads to the Court that Prime Trust should be directed to turnover the crypto assets in dispute to Celsius under section 542 of the Bankruptcy Code. In the alternative, Celsius seeks specific performance of certain contractual provisions allegedly obligating Prime Trust to deliver and transfer the crypto assets to Celsius.

Celsius Network Limited, et al. v. Prime Trust, LLC (In re Celsius Network, LLC, et al.), AP No. 22-1140, US Bankruptcy Court for Southern New York