This is very odd:

Initializing machine ID from D-Bus machine ID.
Adding group `systemd-journal' (GID 120) ...
Done.
You are required to change your password immediately (root enforced)
chfn: PAM: Authentication token is no longer valid; new one required
adduser: `/usr/bin/chfn -f systemd Time Synchronization systemd-timesync' 
returned error code 1. Exiting.
dpkg: error processing package systemd (--configure):
 subprocess installed post-installation script returned error exit status 1

I'm not sure if digitalocean images are customized, in a way that
prevent upgrades. Can you try creating system systemd-timesync user, and
re-attempting the upgrade?

$ sudo adduser --quiet --system --group --no-create-home --home /run/systemd \
    --gecos "systemd Time Synchronization" systemd-timesync

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You received this bug notification because you are a member of Ubuntu
Touch seeded packages, which is subscribed to systemd in Ubuntu.
https://bugs.launchpad.net/bugs/1733468

Title:
  do-release-upgrade failed to update to systemd 229-4ubuntu21

Status in systemd package in Ubuntu:
  New

Bug description:
  This is going from Ubuntu 14 to 16 LTS via do-release-upgrade on
  DigitalOcean.

  ProblemType: Package
  DistroRelease: Ubuntu 16.04
  Package: systemd 229-4ubuntu21
  ProcVersionSignature: Ubuntu 3.13.0-32.57-generic 3.13.11.4
  Uname: Linux 3.13.0-32-generic x86_64
  ApportVersion: 2.14.1-0ubuntu3.25
  Architecture: amd64
  Date: Mon Nov 20 22:08:04 2017
  DuplicateSignature: package:systemd:229-4ubuntu21:subprocess installed 
post-installation script returned error exit status 1
  ErrorMessage: subprocess installed post-installation script returned error 
exit status 1
  InstallationDate: Installed on 2014-04-18 (1312 days ago)
  InstallationMedia:
   
  Lsusb: Bus 001 Device 001: ID 1d6b:0001 Linux Foundation 1.1 root hub
  MachineType: DigitalOcean Droplet
  ProcKernelCmdLine: root=LABEL=DOROOT ro
  RelatedPackageVersions:
   dpkg 1.18.4ubuntu1.2
   apt  1.0.1ubuntu2.17
  SourcePackage: systemd
  SystemdDelta:
   [EXTENDED]   /lib/systemd/system/rc-local.service → 
/lib/systemd/system/rc-local.service.d/debian.conf
   [EXTENDED]   /lib/systemd/system/systemd-resolved.service → 
/lib/systemd/system/systemd-resolved.service.d/resolvconf.conf
   [EXTENDED]   /lib/systemd/system/systemd-timesyncd.service → 
/lib/systemd/system/systemd-timesyncd.service.d/disable-with-time-daemon.conf
   
   3 overridden configuration files found.
  Title: package systemd 229-4ubuntu21 failed to install/upgrade: subprocess 
installed post-installation script returned error exit status 1
  UpgradeStatus: Upgraded to xenial on 2017-11-21 (0 days ago)
  dmi.bios.date: 11/03/2016
  dmi.bios.vendor: DigitalOcean
  dmi.bios.version: 20161103
  dmi.chassis.type: 1
  dmi.chassis.vendor: Bochs
  dmi.modalias: 
dmi:bvnDigitalOcean:bvr20161103:bd11/03/2016:svnDigitalOcean:pnDroplet:pvr20161103:cvnBochs:ct1:cvr:
  dmi.product.name: Droplet
  dmi.product.version: 20161103
  dmi.sys.vendor: DigitalOcean

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