Celsius Network has been in the news recently for halting withdrawals of cryptocurrencies on its exchange—even though it advertises unequivocally on the main page of its website that you can “access your coins whenever” and that you can “swap or withdraw your crypto at any time, with no fees.”
So if you’ve had your withdrawals locked by Celsius—or if you’ve had any other issues where they’re arguably responsible for your losses, like stolen coins, errors, airdrop issues, flash crashes, a hacked account—can you file a lawsuit against them?
The short answer is that you can file an arbitration, but not a lawsuit—Celsius has an arbitration clause, and while it’s possible to challenge the enforceability of a clause, those challenges usually fail. There’s an opt-out provision, but you have to do it within 30 days, and most people don’t.
But that doesn’t mean you can’t recover from them in an arbitration. Our law firm routinely represents consumers in arbitrations, and we’re experienced in filing arbitrations against financial institutions who won’t give people their money back. We take cases against cryptocurrency exchanges, and we have a variety of potential legal claims we can use to try to get your coins back—or get you compensation for any losses. For example, false advertising is one potential option, as well as various consumer protection statutes.
Celsius is operated by a company in New Jersey called Celsius Network, LLC. But their arbitration clause requires their arbitrations to take place in New York, and New York law is applicable to the contract. To be clear, our lawyers aren’t barred in New York—but under New York law, anyone can represent you in an arbitration, even out of state attorneys. We also have partnerships with local attorneys in both New York and New Jersey.
The first question is whether it’s worth it to hire an attorney. In our experience, if you have $100,000 or more involved, it makes sense financially. If you have less, you can do the arbitration on your own, or there’s an option to sue in small claims court in the Celsius terms of service.
We generally try to set up a payment structure in stages, and for most cases those would be a flat fee. If you get a settlement in the earlier stages, you save money—for example, the research and the demand letter would be a first stage, the discovery stage would be next, then the arbitration hearing itself, and finally what’s called “confirming” the award—taking your arbitration decision to a federal court and turning it into an enforceable legal judgment against Celsius. Lastly, there could be an appeal (although it’s extremely hard to appeal an arbitration award, sometimes companies try anyway to waste time).
Our attorneys have done hundreds of arbitrations, and we have substantial technical experience. If you’d like to talk about hiring us to pursue a legal claim against Celsius, or any other cryptocurrency exchange, call us at 657-845-3100 or e-mail us at contact@kneuppercovey.com.
Your legal claims against Celsius may be based on a number of legal theories.
Cryptocurrency is a new technology, but that doesn’t mean that old laws can’t protect you. We have plenty of options to try to help depending on the facts of what happened with your Celsius Network account.
One of the better ones is “conversion,” which is a name for a very old kind of lawsuit where someone exercised control over your property or interfered with your right to possession somehow. Fortunately for anyone with a problem with their Celsius account, one of the courts that has held that conversion claims apply to cryptocurrencies is a New York court. See Shi v. Le, No. 21 CV 1361 (ARR) (CLP), 2022 U.S. Dist. LEXIS 37146 (E.D.N.Y. Mar. 2, 2022); Ox Labs v. Bitpay, Inc., No. CV 18-5934-MWF (KSx), 2020 U.S. Dist. LEXIS 38795 (C.D. Cal. Jan. 24, 2020). Trespass to chattel is another potential claim (basically like conversion, but the interference is less serious). Bitcoin has been held to be subject to a trespass to chattel claim. Schober v. Thompson, Civil Action No. 21-cv-01382-NYW, 2022 U.S. Dist. LEXIS 7894 (D. Colo. Jan. 14, 2022).
Negligence or gross negligence are other legal theories that could apply, depending on what happened to your account. SIM swapping is an example where this might be an option.
Then New York has something called the “General Business Law” which is designed to protect consumers. It’s a broad statute and covers false advertising—and a great upside to it is that the arbitrator can potentially award your attorneys’ fees back to you if you win.
The facts of your case determine what kind of lawsuit against Celsius makes sense, but we pursue any viable claims against them. And our lawyers are very familiar with explaining technology to arbitrators—one of our founders got his start in patent lawsuits, and the other has a background in computer science.
How much does it cost to hire a lawyer to sue Celsius Network?
It depends on your case. A good rule of thumb is that if you have more than $100,000 at risk, we can probably come up with a fee that makes it work taking a shot at getting it back. If the amount is extremely large—seven figures or more—you may want to spend more. In our experience, with higher dollar cases, companies will throw everything they have at trying to win. That means they may have multiple expert witnesses, asking to have the arbitration take multiple days, and lawyers from top firms. One positive to arbitration, though, is that it’s never as expensive as a lawsuit. There’s no formal discovery process, which is one of the biggest cost drivers. There are fewer motions, and you don’t have weeks of trial. Usually it’s just a single day hearing. The consumer rules of the American Arbitration Association are also streamlined and generally protect consumers—so they’re designed to keep costs from ballooning too much, even if Celsius or another crypto exchange tries to make the case more expensive.
What are my chances of winning?
There’s not really a way to predict it. Especially with something like cryptocurrency, your biggest challenge is often explaining the technical issues to an arbitrator who may be a lawyer or retired judge with no experience at all in technology. We work with you to make the presentation understandable even to a lay person, and that’s a big part of improving your odds of winning. Many cases settle, but there’s no guarantee of that—sometimes you have to go all the way to the end.
One important thing is that there is currently speculation that Celsius Network could file for bankruptcy. News articles are claiming the company has hired bankruptcy lawyers, and that Goldman Sachs is raising money for a fire sale of Celsius Network’s assets in bankruptcy. If a bankruptcy does get filed, there are complex legal issues that could affect your claim that aren’t resolved in the context of cryptocurrency. First, any pending arbitrations against Celsius Network itself will be automatically stayed during bankruptcy if that happens. Then, whether you can recover could depend on whether your cryptocurrency was loaned or whether it was being held in their custody for your benefit. It also depends on whether the cryptocurrency is still actually there, or whether there has been any kind of malfeasance. This is part of why we suggest that it makes sense to proceed with lawyers primarily if the amount you have with Celsius Network is higher than six figures – the more you have, the smaller the attorney’s fees will be as a percentage of what’s at risk.
Our firm is also experienced in lawsuits under aiding and abetting, conspiracy, and RICO claims in which we attempt to recover money from third parties who are still financially solvent. In fact, we are one of the few law firms in recent years to have taken a civil RICO claim past a motion to dismiss. We believe there may be strong legal claims against others involved in the decision to unlawfully halt withdrawals, and it is possible those claims could proceed in a lawsuit or arbitration even if a bankruptcy is filed. A bankruptcy court could decide to stay those actions, but it is not automatic. There is also the possibility of pursuing what’s called an “adversary proceeding” in bankruptcy–essentially a lawsuit in the bankruptcy court.
If you’d like to hire us to arbitrate against Celsius Network, or any other cryptocurrency exchange, call us at 657-845-3100 or e-mail us at contact@kneuppercovey.com.