¶ 2701
Overview
Scope of the chapter. This chapter sets out the doctrinal framework that governs digital assets in a case under the Bankruptcy Code. It addresses four questions in order. The first is what becomes property of the estate when the debtor holds tokens, either for itself or for others. The second is how customers of a failed exchange, lender or custodian are treated, and which statutes can take customer assets out of the estate or give them a priority. The third is how the automatic stay, setoff and the rules on executory contracts apply to accounts that are frozen at the moment of filing. The fourth is how customer claims are filed, allowed, classified and traded. The chapter then turns to the individual debtor who holds digital assets, whose duties of disclosure and turnover have produced a growing body of decisions denying discharge, and closes with cross-border cases under chapter 15 and the reform proposals now before Congress.
Relationship to other chapters. Three neighboring chapters carry material this chapter assumes. Chapter 10 examines the private-law character of the custodial relationship (bailment, trust, debt, agency and the Article 8 and Article 12 routes) and the terms of service that usually decide it. Chapter 28 recounts the major platform failures (Celsius, FTX, Voyager, BlockFi and their predecessors) as case histories. Chapter 29 treats the valuation date of crypto claims, distributions in kind and avoidance actions against customers. This chapter cross-refers to each and does not repeat their detail. Chapter 7 covers security interests and the safe harbors that protect secured lenders against the stay, and chapter 11 covers the chartered custodians whose insolvency regimes lie outside the Bankruptcy Code.
The two questions that decide most cases. Almost every digital-asset bankruptcy dispute reduces to two questions. The first is a property question: on the petition date, did the debtor hold the tokens as its own, or did it hold only bare legal title (or no title at all) for customers? The answer comes from state law and the parties' contracts, applied through § 541(a)(1) and (d). The second is a procedural question: if the tokens are property of the estate, the customer holds an unsecured claim and must proceed through the claims process, subject to the automatic stay, the valuation rule of § 502(b) and the plan. If the tokens are not property of the estate, the customer can seek their return, though still through the bankruptcy court and subject to the court's control of the timing and to any shortfall that commingling has produced.
What is distinctive about digital assets. The Bankruptcy Code contains few provisions directed at digital assets. Until the GENIUS Act amendments, discussed at ¶ 2730, none named them. Courts have applied the general provisions, and three features of digital assets have shaped the results. Tokens move instantly and irreversibly, so that a freeze or a withdrawal pause before filing often decides who bears the loss. Platforms hold customer tokens in pooled omnibus wallets, so that tracing a customer's units into the pool is often impossible. And the terms of service are drafted by the platform, revised often and accepted by clickwrap, so that the ownership question frequently turns on which version of the terms a customer accepted.
The individual debtor. The individual who files a chapter 7 or chapter 13 case and holds tokens presents a different problem. The trustee cannot find a self-custodied wallet without the debtor's cooperation, and an exchange account may not appear in bank statements except as transfers to an unfamiliar payee. The Bankruptcy Code answers with duties of disclosure and surrender (§ 521), a turnover obligation (§ 542) and the sanction of denial of discharge (§ 727). The reported decisions show that trustees and the United States Trustee now look for transfers to crypto platforms as a matter of routine, and that a debtor who omits them from the schedules risks losing the discharge. See ¶ 2770.
Terminology. In this chapter, "platform" means an exchange, lender, broker or custodian that holds digital assets for customers. "Customer" means a person who has deposited assets with a platform or holds an account with it. "Custody" and "control" are used as defined in ch. 1 ¶ 180 and ch. 6. "Earn," "custody" and "borrow" programs refer to the product lines that the Celsius debtors offered, which have become the standard vocabulary for the three common relationships: a yield account in which the customer transfers title, a custody account in which the platform holds for the customer, and a loan secured by the customer's tokens.
Organization. Paragraph 2710 states the property-of-the-estate framework. Paragraph 2720 applies it to customer assets, with the decisions that have divided customer programs into estate and non-estate property. Paragraph 2730 examines the statutes that can protect customers in insolvency, including the GENIUS Act's new provisions for payment stablecoins. Paragraph 2740 addresses whether a crypto platform can be a stockbroker or commodity broker, a question that decides which chapter is available. Paragraph 2750 covers the stay, freezes and setoff, and ¶ 2760 the claims process. Paragraph 2770 treats the individual debtor, ¶ 2780 cross-border cases and reform, and ¶ 2790 gives a checklist.