“We have changed our terms.” How often do you get this pop-up or email? It seems like companies, services, and platforms are constantly changing their terms.
Now—answer honestly. How often do you read those changed terms or the fine print of any contract, whether in original or amended form? More than likely,
· You assume the reputable company, service, or platform is looking out for your best interests;
· You figure you’re in the same boat with everyone else who uses it, so why not;
· You simply want the service, app, or product so much that you’re going to agree to terms no matter what; or
· You remember something about contracts of adhesion from your first year of law school, and you’re sure you can mount a defense if necessary.
The entity you’re doing business with spent a lot of money on lawyers to compose every single word, which they deem important—to protect their interests.
Customers of bankrupt cryptocurrency exchange Celsius Network are learning this the hard way. Even though its former CEO had made numerous representations that his customers owned their Earn Accounts, the fine print of changed terms said otherwise. And although these customers may still recover something through the claims process, the bankruptcy judge overseeing Celsius’s Chapter 11 proceedings has ruled that the changed terms (which all customers agreed to by clicking “Accept”) are binding. All assets in those customers’ Earn Accounts are property of the bankruptcy estate, including the inaptly named Stablecoins.
The changed terms which customers accepted included the following:
· [Y]ou grant Celsius . . . all right and title to such Eligible Digital Assets, . . . with all attendant rights of ownership . . . .
· You will not be able to exercise rights of ownership. . . .
· In the event Celsius becomes bankrupt, enters liquidation or is otherwise unable to repay its obligations, any (such assets) 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.
Last week’s opinion by Bankruptcy Judge Martin Glenn of the Southern District of New York is consistent with concerns I first expressed early last year regarding the crypto exchange Coinbase Global and crypto hedge fund Three Arrows Capital. Depending on the fine print, crypto assets may very well be property of a bankruptcy estate. So-called crypto “owners” are relegated to the status of general unsecured creditors. Expect this to be true in the FTX and BlockFi bankruptcies as well.
My partner, Zana Tomich, recently posted here about the importance of getting business deals in writing. But it’s just as important to read and understand the terms, whether original or changed. If it’s more than a Netflix subscription, consult an attorney before clicking “Accept.” The attorneys of Dalton & Tomich are ready to assist with your business, commercial litigation, and creditor bankruptcy needs.