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Steven O. Weise

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Steven O. Weise is a partner in the Corporate Department and practices in all areas of commercial law.

Steven’s experience in financing is extensive, especially in those secured by personal property, including structured financing. He also handles matters involving California real property anti-deficiency laws, workouts, guarantees, sales of goods, equipment leasing, commercial paper and checks, letters of credit, and investment securities. Steven’s experience covers e-commerce, contract law (including “plain English” drafting), legal opinions, and consumer credit law compliance matters.

In addition, Steven lectures widely on commercial law topics and legal opinion letters and is the author of over 100 articles on these topics.

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On July 5, 2022, cryptocurrency brokerage Voyager Digital filed for chapter 11 in the Southern District of New York Bankruptcy Court, citing a short-term “run on the bank” due to the “crypto winter” in the cryptocurrency industry generally and the default of a significant loan made to a third party as the reasons for its filing.  At Voyager’s first day hearing on July 8, 2022, the Bankruptcy Court asked the critical question of whether the crypto assets on Voyager’s platform were property of the estate or its customers.  Voyager asserted the crypto assets were assets of the estate pursuant to the terms of its customer agreements, but the question of ownership was more problematic in the context of a liquidation.  In that context, Voyager’s plan of reorganization proposes to resolve any mystery of ownership by delivering the reorganized company to its customers.

On July 13, 2022, cryptocurrency lender Celsius Network filed for chapter 11 in the Southern District of New York Bankruptcy Court.  Celsius had frozen customer withdrawals on June 12, 2022 and, at the time of its chapter 11 filing, indicated that it would not be requesting court authority to allow customer withdrawals.  Celsius noted in a press release that customer claims would be addressed through the chapter 11 process.

Voyager’s and Celsius’ chapter 11 bankruptcy filings highlight the question of whether crypto assets held by an exchange, or similar platform, may be considered property of a bankruptcy estate and, therefore, not recoverable by the customer, who would then likely be an unsecured claimholder of the debtor.

While some commentators have suggested that crypto assets might be considered property of the exchange’s bankruptcy estate, existing common law, existing provisions of Uniform Commercial Code (UCC) Article 8, and proposed amendments to the UCC recognize that if the arrangement and relationship between the exchange and its customers is one that is characterized as “custodial,” the crypto assets held by the exchange should remain property of the customer and, hence, not subject to dilution by general unsecured claimholders.

Last July, the Uniform Law Commission completed a uniform model state law, known as the Uniform Regulation of Virtual-Currency Businesses Act (“URVCBA” or the “Act”) (Steve Weise participated in the preparation of the Act).  Currently, state regulation in the virtual currency space is carried out under a patchwork of laws that typically do not directly contemplate virtual currency and blockchain technology. Attempting to bring clarity as to which types of entities require state licensure and also to encourage responsible innovation in this emerging area, the URVCBA provides a statutory framework for the regulation of companies engaging in “virtual-currency business activity.”  After carefully defining which activities fall under the Act’s purview, the uniform law requires covered entities to make the typical financial and business disclosures in its application, and also contains numerous user and consumer protections, including certain enforcement powers by the relevant state authority.

The mission of the Uniform Law Commission is to draft state laws on topics where standardized regulation across state lines is practical (e.g., the Uniform Commercial Code (the “UCC”)). Gaining final approval in 2017, the Act has so far been introduced in Connecticut, Hawaii, and Nebraska.