Who owns the crypto held on a platform: what three courts decided

2026-08-01 · Custody & Security

New Zealand’s High Court held that the account holders owned the coins left on a failed exchange. Courts in New York and Delaware looked at two other platforms and held that the estate owned them, and the difference came down to two things a customer can check before depositing anything.

The three rulings

	Cryptopia	Celsius	Prime Trust
Forum	High Court of New Zealand, Gendall J	Bankr. S.D.N.Y., Chief Judge Glenn	Bankr. D. Del., Judge Stickles
Citation	`[2020] NZHC 728`	`22-10964 (MG)`, ECF 1822	`23-11161 (JKS)`, D.I. 919
Decided	8 April 2020	4 January 2023	18 July 2025
Documents	Silent on trust until 2018, and the trust was found without them	Section 13 granted the company “all right and title, including ownership rights”	Disclaimed any fiduciary duty, in a contract between two companies
Records	A database showing every account’s balance in every coin	Not reached: the contract decided it	Omnibus wallets, no per-customer record the court could rely on
Owner	The account holders	The bankruptcy estates	The bankruptcy estates
Result	The crypto never entered the estate	Unsecured claims against the estates	Unsecured claims, paid in dollars rather than coins

What the record shows

Cryptopia: a trust that the paperwork did not create

Cryptopia Ltd was formed in 2014 as a cryptocurrency exchange in New Zealand. Its servers were hacked in January 2019. Gendall J recorded that somewhere between nine and 14 per cent of the cryptocurrency on the platform was taken, valued at around NZ$30 million, and the shareholders resolved to liquidate the company in May 2019. The liquidators applied to the High Court under s 284(1)(a) of the Companies Act 1993 for directions on how to categorise and distribute what was left.

The creditors argued that everything should be distributed pari passu, treating account holders and other unsecured creditors equally. The account holders argued the digital assets belonged to them and should be divided by currency in proportion to the balances recorded in Cryptopia’s database.

Gendall J answered both questions for the account holders. All the digital assets are “property” under s 2 of the Companies Act, and they are “all held by way of express trusts”. At [183] he concluded that Cryptopia “acted as a bare trustee under a separate trust for each individual cryptocurrency held on its platform”.

The internal database, called the SQL database in the judgment, runs through all three certainties. On subject matter, at [147]: the cryptocurrencies were “clearly recorded in Cryptopia’s SQL database records and I am satisfied this provided sufficient certainty of subject matter here”. On objects, at [148], the beneficiaries “can be taken to be those with positive coin balances for the respective currencies in Cryptopia’s SQL database”. On intention, at [153], “The SQL database that Cryptopia created showed that the company was a custodian and trustee of the digital assets and effect needs to be given to this”.

The documents did less. The earliest terms date from January 2015, and the judgment states at [24] that the relationship between Cryptopia and its account holders “was not a well-documented one”. Terms introduced on 7 August 2018 addressed the point at clause 5(e): “Each user’s entry in the general ledger of ownership of Coins is held by us on trust for that user.” The same clause set records at 5(d) that “the Coins in your deposit wallets may be pooled in our internal accounts with other users’ Coins at any time”. Gendall J found the trusts arose as soon as Cryptopia came to hold each new currency, “certainly before 7 August 2018”, and reached that finding without relying on the amended terms. He also recorded at 157 that mixing one party’s fungible property with another’s in a single pool is not a significant indicator against a trust [P].

Celsius: the clause that moved title

Celsius Network LLC and its affiliated debtors filed Chapter 11 petitions in the Southern District of New York in July 2022. On 4 January 2023 Chief Judge Martin Glenn issued a 45-page memorandum opinion deciding who owned the cryptocurrency in the company’s Earn accounts. He found that the terms of use “formed a valid, enforceable contract between the Debtors and Account Holders, and that the Terms unambiguously transfer title and ownership of Earn Assets deposited into Earn Accounts from Accounts Holders to the Debtors”.

At the petition date there were approximately 600,000 Earn accounts holding cryptocurrency worth approximately $4.2 billion as of 10 July 2022. The controlling document was Terms of Use Version 8, effective 15 April 2022, a clickwrap contract governed by New York law under section 33. On the debtors’ uncontroverted evidence, 99.86% of Earn account holders had accepted Version 6 or later.

The operative language sits in section 13. In consideration for rewards, the account holder grants Celsius “all right and title to such Eligible Digital Assets, including ownership rights, and the right, without further notice to you, to hold such Digital Assets in Celsius’ own Virtual Wallet or elsewhere, and to pledge, re-pledge, hypothecate, rehypothecate, sell, lend, or otherwise transfer or use any amount of such Digital Assets” [P]. Section 4.D describes the Earn Service as paying a financing fee “in exchange for entering into open-ended loans of your Eligible Digital Assets to Celsius under the terms hereof”, and the debtors pointed to four further references to the same effect at sections 2, 4, 10 and 12.

The same document set out the consequence. An account holder using the service acknowledged that “1. You will not be able to exercise rights of ownership; 2. Celsius may receive compensation in connection with lending or otherwise using Digital Assets in its business to which you have no claim or entitlement; and 3. In the event that Celsius becomes bankrupt, enters liquidation or is otherwise unable to repay its obligations, any Eligible Digital 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”.

Glenn placed three limits on the ruling in the opinion itself. The finding creates a presumption that an individual account holder can rebut with a contract formation defence. It does not decide whether Celsius violated state securities laws. And it “does not determine the ownership of assets in the Debtors’ Custody Program, Withhold Accounts, or Borrow Program”. Vermont’s objection had told the court that the debtors did not segregate Earn assets from Custody and Withhold assets, and that the commingling would make it difficult to determine who owned what.

One date in the opinion does not match the rest of the record. Its opening line refers to “the July 15, 2022 petition date”; the docket and the later opinions in the case give 13 July 2022.

Prime Trust: records that could not answer the question

Prime was founded in 2016 as a trust and custodial services company for traditional financial assets, and moved into digital assets as the market grew. Its direct customers were mostly other companies, called Integrators in the bankruptcy, who presented an end-user agreement to retail users on Prime’s behalf. Prime contracted with approximately 140 Integrators and thousands of end users, most Integrators under a master services agreement, and at its height there were “dozens of variations of the MSA, End-User Agreements, and other service-related agreements”. At peak it processed over 300,000 transactions a day and held over $3.8 billion in cryptocurrency and fiat. Prime Core Technologies Inc. and three affiliated debtors filed Chapter 11 petitions in Delaware on 14 August 2023.

Judge J. Kate Stickles held an evidentiary hearing on 14 and 21 February 2025 on the Plan Administrator’s Distribution Motion, and issued a written opinion on 18 July 2025 granting it. She decided the ownership question on two independent grounds.

The first was that no trust was created. The Integrator master services agreement stated at section 14.1 that it did not “create a partnership, franchise, joint venture, agency, fiduciary or employment relationship between the Parties”. The end-user agreement and the custodial agreement both allowed Prime to “pledge, repledge, hypothecate, rehypothecate, sell, or otherwise transfer or use” customer assets with all attendant rights of ownership [P]. Her conclusion: “Other than the corporate name of ‘Prime Trust, LLC, a Nevada chartered trust company,’ the End-User Agreement and the Custodial Agreement submitted into evidence do not establish that a trust relationship exists between End-Users, Integrators, and/or the Debtors”.

The second ground did not depend on the first. A trust beneficiary claiming commingled funds must both establish the trust and trace the property. The Plan Administrator’s forensic accountant, James P. Brennan of J.S. Held, testified that Prime held customer crypto in shared omnibus wallets rather than segregated wallets, swept each customer’s unique deposit address into those omnibus wallets, and satisfied withdrawals from whichever omnibus wallet held enough, so the coins a customer received were not the coins that customer had sent. Fiat sat in omnibus bank accounts alongside Prime’s own operating money, moved between accounts in round-dollar transfers, and was not regularly reconciled. He testified that the internal ledgers “were corrupt” and that “[t]he ledger was fraudulently manipulated, and so we can’t rely upon that ledger”.

The court found the debtors “hopelessly commingled Currency such that the Currency is not traceable”, so the currency is property of the estates and may be distributed in dollars to satisfy general unsecured claims. Stickles closed: “Although the result may be disappointing to certain creditors, the Court is bound by the evidence before it and the law governing the issues”. Four parties, including Zap Solutions and Electric Solidus, were carved out by agreement and their rights were not decided.

What I think is going on

Two variables decided all three cases, and a customer could have checked both of them before depositing anything.

The first is what the agreement says about title. Celsius is the clean example, because Glenn did not have to weigh conduct or records at all. Section 13 said the company took title, section 4.D called the arrangement a loan, and the acknowledgement paragraph described bankruptcy and creditor status in advance. Around 600,000 people accepted that document, and almost all of them accepted a version that said so plainly.

The second is whether the platform’s records can identify your share. This is the one serious investors underweight, and Cryptopia and Prime Trust are the paired experiment.

Both platforms pooled customer coins. Cryptopia’s own 2018 terms said your coins may be pooled with other users’ coins at any time, and Gendall J said in terms that pooling fungible property is not a significant indicator against a trust. What saved the Cryptopia account holders was that the database recorded, currency by currency, which account held what, so the court could name the trust property and name the beneficiaries. Prime Trust pooled the same way and had no equivalent record. Its forensic accountant told the court he could not rely on the internal ledger, and once the ledger goes, there is nothing left to point at.

So the question to put to a platform is whether anyone can produce a per-customer record and show that it reconciles to what the platform actually holds. Pooling on its own tells you very little, because Cryptopia pooled and its account holders kept their coins. The Delaware court told the Prime Trust objectors that even assuming a trust existed, they still lost, and it was the records that lost it for them.

Now the part I find hardest to give useful advice about. An end user of a fintech app built on Prime Trust rails was governed by a master services agreement between Prime and the company whose app they had downloaded. That document disclaimed any fiduciary relationship in section 14.1. The end user had never seen it, could not have asked for it, and would not have known to look. The ten-minute check I am about to describe would have returned nothing useful to that person, because the document that decided their case was not theirs to read. That is a real limit and I would rather say it than pretend the reading exercise covers everybody.

The drafting of these agreements is remarkably consistent, which hands you a shortcut. The phrase “pledge, repledge, hypothecate, rehypothecate” appears in the Celsius Earn terms and in both the Prime Trust end-user agreement and its custodial agreement, in nearly identical wording. Those four words are the single most useful thing to search for in any agreement you are about to accept.

What reduces your exposure

Open the terms of service for the specific product you are using and search the text. Seven searches, and you will have most of the answer:

title, ownership, right and title. Glenn’s ruling turned on one sentence granting Celsius “all right and title”. If your agreement contains that formula, the company owns the asset and you own a claim against the company.
pledge, hypothecate, rehypothecate. The company has reserved the right to use your asset for its own account.
loan, lend, borrow. Celsius described the Earn Service as an open-ended loan to the company. Nine states and the District of Columbia argued in the bankruptcy that the word “loan” was used throughout, which was accurate and did not help anybody.
bankrupt, insolvency, creditor. Celsius told its users, in the terms, that if the company went bankrupt their rights would be those of a creditor. Agreements that transfer title usually say so somewhere, because their drafters want that disclosure on the record.
segregate, omnibus, commingle. This is the second variable, and a lot of agreements go vague right here, which is itself informative.
fiduciary. Prime Trust’s Integrator agreement disclaimed a fiduciary relationship expressly.
governing law. Celsius Version 8 chose New York at section 33. That clause decides which insolvency regime you land in, and the three cases here ran under New Zealand company law, US bankruptcy law in New York and US bankruptcy law in Delaware. It is set long before the failure and you do not get a vote on it.

Then check which product you are actually in. Celsius ran Earn, Custody, Withhold and Borrow programmes side by side, and Glenn decided ownership only for Earn, saying in the opinion that the ruling did not determine ownership for the other three. Same platform, same asset, same customer, different legal question depending on a designation in the app. If you are holding through something labelled Earn, Rewards, Flexible Savings or a yield product, assume the title question is live until the document tells you otherwise.

Watch the word “account”. It is doing more work than any other word in this area. “Earn account” reads like a deposit account at a bank, and the Coordinating States argued exactly that in the Celsius bankruptcy: that account holders would not have understood the terms to be a transfer of ownership. Glenn read the document instead. The Prime Trust plan defined an Account as one identified in the debtors’ books and records with a balance at the petition date, and added that Accounts “are not ‘accounts’ within the meaning of Article 9 of the Uniform Commercial Code”. The word needed a definition and a carve-out before the document that decided who got paid could use it safely.

Questions worth putting to a platform in writing, which take longer than ten minutes and are worth the wait:

Which clause states who holds legal title to assets in this specific product?
Do you maintain a per-customer record identifying my holdings, and how often is it reconciled against what you actually hold on-chain and at your banks?
Who performs that reconciliation, and will you show me the most recent one?
Which legal entity is my counterparty, and where is it incorporated?
If you fail, which document decides whether I am an owner or a creditor, and may I read it?

Question five is the Prime Trust question, and a platform that cannot answer it has told you something. Question two is the one that catches bad bookkeeping, and bad bookkeeping was enough to decide Prime Trust on its own.

Written answers improve your position in an insolvency, because they are evidence and somebody has to stand behind them. They do nothing about market risk, and they do not survive a counterparty that answers untruthfully. Prime Trust shows why: its forensic accountant told the court the internal ledger had been manipulated, and a customer holding a reassuring email would still have ended up an unsecured creditor.

Moving assets to a wallet you control takes the title question off the table, because there is no agreement capable of transferring ownership and no estate for the coins to fall into. It hands you key management, backup and inheritance instead, which is a different failure mode with its own long record of people losing everything. Neither arrangement is safe in the general sense. They fail differently, and the ten minutes spent reading is how you find out which failure you have signed up for.

Sources

Ruscoe and Moore v Cryptopia Limited (in liquidation), CIV-2019-409-000544, [2020] NZHC 728, High Court of New Zealand, Christchurch Registry, Gendall J, 8 April 2020. Full judgment, 74pp, published by Grant Thornton New Zealand, the liquidators’ firm.
Companies Act 1993 (NZ), ss 2 and 284(1)(a).
In re Celsius Network LLC, No. 22-10964 (MG), Bankr. S.D.N.Y., Memorandum Opinion and Order Regarding Ownership of Earn Account Assets, ECF No. 1822, 4 January 2023. Full opinion, 45pp on govinfo.
In re Prime Core Technologies Inc., et al., No. 23-11161 (JKS), Bankr. D. Del., Opinion on the Plan Administrator’s Distribution Motion (Related D.I. No. 919), the Hon. J. Kate Stickles, 18 July 2025. Full opinion and order on the court’s own site, and the same document on govinfo.
Amended Joint Chapter 11 Plan of Reorganization for Prime Core Technologies, Inc. and Its Affiliated Debtors, Article 2.5(b) (Account Treatment Procedures), Article 1.1 (“Account”), quoted in the 18 July 2025 opinion.
First Federal of Michigan v. Barrow, 878 F.2d 912 (6th Cir. 1989), and In re Columbia Gas Systems Inc., 997 F.2d 1039 (3d Cir. 1993), on tracing commingled trust funds, applied in the Prime Core opinion.
National Provincial Bank Ltd v Ainsworth [1965] AC 1175 (HL), and B2C2 Ltd v Quoine Pte Ltd, Singapore International Commercial Court, considered in Cryptopia.

Related on this site: the case files for Ruscoe v Cryptopia, Celsius and Prime Trust.

Disclosure. Max Avery is affiliated with Digital Ascension Group (DAG). Investment advisory services are offered through DAG Wealth, an SEC-registered investment adviser (CRD No. 328627). Registration does not imply a certain level of skill or training. DAG is not a law firm and does not provide legal or tax advice. Custody arrangements with third-party independent qualified custodians reduce certain risks but do not eliminate them. Nothing here is investment, legal, or tax advice, or a recommendation to buy or sell any asset. This article describes matters of public record; charges are allegations and defendants are presumed innocent unless and until proven guilty.