Celsius Network LLC v. Meghji

Background

Celsius Network LLC and related debtors operated a cryptocurrency platform and filed chapter 11 bankruptcy cases in the Southern District of New York. iCapital Management Inc. was a creditor in those cases. It filed a claim asserting that Celsius held cryptocurrency assets in trust for iCapital. Voelker did not file a claim personally but later sought to act on iCapital’s behalf.

The bankruptcy court confirmed Celsius’s reorganization plan in November 2023, and the plan became effective on January 31, 2024. The plan established a settlement for certain account-holder claims. Claim holders who did not opt out would receive an allowed claim equal to 105% of the scheduled amount, and their existing proofs of claim would be removed. The plan also barred lawsuits involving claims released by the plan. iCapital did not opt out, and its claim was expunged after the plan provided for its treatment and distribution.

In April 2024, Voelker asked the bankruptcy court for permission to file a late adversary proceeding against the post-effective-date debtors. The proposed lawsuit sought the return of cryptocurrency that Voelker said iCapital had pledged to Celsius and that had been transferred to the bankruptcy estate by mistake. The bankruptcy court denied permission, finding that iCapital and Voelker were barred from bringing the proposed proceeding, that Voelker lacked standing, and that the requested alternative relief could not be granted because iCapital’s claim had already been resolved under the plan.

District Court Appeal

Voelker argued that the cryptocurrency was held in bailment or trust and therefore was not property of the bankruptcy estate or subject to the bankruptcy court’s jurisdiction. He also argued that the plan’s injunction did not cover those assets. The appellees moved to dismiss the appeal under equitable mootness. Equitable mootness is a court-created doctrine allowing dismissal of a bankruptcy appeal when later events make the requested relief unfair to grant, even if some form of relief might technically be possible.

The court explained that, in the Second Circuit, a bankruptcy appeal is presumed equitably moot when a reorganization plan has been substantially consummated. Substantial consummation requires, among other things, that most property required by the plan has been transferred and that distributions under the plan have begun. The court found those conditions satisfied. As of August 2024, the debtors had distributed $2.53 billion in cryptocurrency and cash, and as of March 2025, 98% of cryptocurrency claims had been distributed.

The court also found that Voelker had not overcome the presumption of equitable mootness. Neither iCapital nor Voelker had objected to the plan’s treatment of iCapital’s claim or sought a stay of the confirmation order. iCapital had already received a plan distribution. Granting the requested relief could unravel the settlement and require clawing back, reallocating, and redistributing amounts paid to other creditors. The court therefore concluded that the requested relief would be inequitable.

Alternative Merits Analysis and Disposition

The court stated that, even if the appeal were not equitably moot, it would affirm the bankruptcy court’s conclusion that Voelker was barred from starting the proposed adversary proceeding. The court reasoned that iCapital’s bankruptcy claim was based on the same assets that Voelker sought to pursue, and iCapital had accepted the plan’s 105% settlement without opting out. The plan’s ability to bind iCapital and Voelker therefore did not depend on whether the assets were ultimately part of the bankruptcy estate; it depended on iCapital’s agreement to give up litigation over that issue in exchange for the plan treatment.

The court did not address the appellees’ separate argument that Voelker lacked standing because the appeal was dismissed as equitably moot. The motion to dismiss the appeal was granted, and the appeal was dismissed. The court also denied Voelker’s emergency-relief motion as moot and directed the clerk to close the relevant motions and the case.