In the short time since we last provided an update regarding the bankruptcy cases of Celsius Networks LLC and its affiliates (here), there have been a number of material developments to report.  

• As ordered by the court, the debtors filed copies of all versions of Celsius’ Terms of Use that have been in effect since February 1, 2018.  The filing contains more than 1000 pages and includes eight versions of the General Terms of Use (or TOS) with mark-ups showing changes from version to version.  Of interest is the development of the paragraph that governs a customer’s consent to Celsius’ use of digital assets. In the fifth version, effective September 30, 2020, references to “interest” were replaced with “rewards” and references to a customer’s “Account” were replaced with “Celsius Wallet” (and later to “Celsius Account”). In the sixth version, going into effect on July 22, 2021, the reference to “Your” Digital Assets was removed so that the title read: “Consent to Celsius’ Use of Digital Assets.” “You may not be able to exercise certain rights of ownership” was replaced with “You will not be able to exercise rights of ownership” (emphasis added). Any lingering implication that the customer might retain interests in digital assets deposited into the program was stricken from the TOS. And the following was added:  “In the event that Celsius becomes bankrupt, enters liquidation or is otherwise unable to repay its obligations, you may not be able to recover or regain ownership of such Digital Assets, and other than your rights as a creditor of Celsius under any applicable laws, you may not have any legal remedies or rights in connection with Celsius’ obligations to you.” Earlier revisions removed implications that Celsius retained some risk of loss in connection with a customer’s account. In his declaration accompanying the TOS, Alex Mashinsky explained that “[e]xisting customers and counterparties were advised of the updated Terms of Use Version 6 via email on the date the Terms of Use Version 6 went into effect.” He does not detail whether customers were notified of prior changes to the TOS or whether they were asked to accept the revised TOS with an affirmative act. These differences may raise interesting questions regarding the treatment of customers onboarded while different TOS were in effect, or perhaps the claims that those customers may have against the Celsius.
• Celsius filed its most recent budget and coin report on August 14^th. The budget indicates that the enterprise will have negative cash flow before the end of October and reflects expenses relating to “restructuring activities” to exceed $33 million from August through October. The coin report details digital currency assets and liabilities as of July 29^th, showing a shortfall of more than $2.8 billion. It would appear that some form of debtor-in-possession financing is needed in short order. Of course, absent consent from any such lender, such financing would be repaid in full before junior creditors (i.e., customers) would be entitled to any recovery.   
• The Bankruptcy Court approved the debtors’ motion authorizing Celsius Mining LLC to sell Bitcoin generated from its mining activity on an arms’-length basis to unaffiliated third parties, the proceeds of which shall be directed to a segregated account. Celsius Mining entity may use the proceeds in the ordinary course of its business or as otherwise authorized by the court. Celsius Mining is an indirect subsidiary of Celsius Networks Inc. and, along with Celsius Networks LLC, one of the eight affiliated entities that filed bankruptcy. Celsius has reported that as recently as July 2022 it had plans to proceed with an IPO of Celsius Mining.
• Letters from customers have continued to flood the docket. Stories of misery are aplenty, including in letters from those that had engaged in the lending program. Pursuant to that program, customers could post digital asset collateral in exchange for low or no interest loans in fiat currency or stablecoin. Customers wishing to repay their loans and recover the posted collateral have expressed surprise and shock that they are unable to do so and that title to their digital assets may have passed to Celsius Lending LLC. In one instance, a customer filed documentation purporting to show a one-year loan for $37,000 at a 0% interest rate with a whopping 25% loan-to-value ratio (approximately 3.69 Bitcoin). Celsius has stated that, as of July 13, 2022, it had approximately 23,000 loans outstanding in the aggregate amount of approximately $411 million which were backed by approximately $765.5 million in digital asset collateral.   
• Counsel to the Official Committee of Unsecured Creditors filed an unusual “statement” regarding its objectives in the case. They explained that the committee “is committed to thoroughly investigating Celsius, including potential misconduct by Celsius and its insiders, and pursuing a resolution that will maximize Celsius’ value for the benefit of its account holders and unsecured creditors.”  Their objectives include: (i) ensuring that Celsius is effectively safeguarding account holders’ assets, (ii) overseeing the Celsius’ efforts to develop a viable business plan, reducing overhead and preserving cash reserves, (iii) investigating the conduct of Mr. Mashinsky and other insiders, including with regard to asset deployment decisions, prepetition transfers, and other issues, and (iv) exploring options to reorganize or sell the Celsius businesses to maximize value. The Celsius cases present a somewhat unique opportunity for the committee to exercise leverage and provide input regarding the outcome.  Given the lack of funded debt, the committee represents the interests of the most powerful creditor contingency in these cases – the customers.  
• The United States Trustee filed a motion seeking the appointment of an independent, third party examiner. The Bankruptcy Code provides that a court may appoint an examiner to conduct investigations as appropriate, including of any allegations of “fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity” regarding the debtor or by current or former management thereof, if, among other things, such appointment is in the interests of creditors, any equity security holders, and other interests of the estate. As support, the UST argues that there are credible allegations of incompetence or gross mismanagement, that there are significant issues of transparency, and that there exists widespread mistrust of the company. Any such widespread investigation would undoubtedly be expensive and seemingly overlap the investigations of the Unsecured Creditors’ Committee.  Of course, the committee only represents one constituency, general unsecured creditors, and is not tasked with making a public record of its findings. The UST mentions it its motion that it has received two separate requests for the appointment of official committee of equity holders, a constituency rarely granted the benefit of an official committee absent evidence of equity value.