“Easter eggs are basically messages or particular references deliberately hidden throughout a movie that the usual movie-goer often fails to notice but they are always there.”

Most articles about Chief United States Bankruptcy Judge Michael Glenn’s opinion that “Earn Assets in Earn Accounts constitute property of the Estates” (opinion, p. 45) focus on the court’s reliance on the terms of service for the Celsius Earn Accounts and how those terms effectively transferred ownership of the assets in those accounts. But did Judge Glenn place an Easter egg in the opinion that could be argued in the future?

Sharp-eyed bankruptcy professionals will note the following statement by Judge Glenn on p. 41 of the opinion:

Thus, even if the parties’ contract purports to provide the creditor with a security interest in property, unless the security interest is perfected under applicable non-bankruptcy law, a trustee can assert strong-arm power under section 544(a) of the Bankruptcy Code to avoid the lien. 11 U.S.C. § 544(a). See also In re Castle Ventures, Ltd., 167 B.R. 758, 765 (Bankr. E.D.N.Y. 1994) (“However, section 544(a) of the Code, also referred to as the ‘strong arm’ clause, allows a trustee in bankruptcy to avoid liens and security interests against the debtor’s estate which were not properly perfected under state law prior to the debtor’s bankruptcy filing.”).

The “strong arm” power in a bankruptcy case allows a bankruptcy trustee to set aside (or “avoid”) an interest in property that could be reached by a judgment lien creditor. See 11 U.S.C. § 544. If a party places assets in the possession of a debtor in such a way that a judgment creditor of that debtor could levy execution on that asset, the asset can become property of the debtor’s bankruptcy estate. This provision has been in the U.S. Bankruptcy Code since it became effective in 1979 and has been used innumerable times in the last 40-plus years to allow bankruptcy trustees, Chapter 11 debtors in possession, and others to recover assets for bankruptcy estates.

Celsius apparently did not argue the strong arm clause as a basis to justify its argument that its stablecoins and the assets in the Earn Accounts would be property of its bankruptcy estate. Could the reference to the “strong-arm” power be Judge Glenn’s way of telling customers that the terms of service might not be the only way that Celsius might take and use what had been in their Earn Accounts? That remains to be seen.

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