Celsius Creditors Fight To Stop $23M Stablecoin Sale

The court should deny Celsius’ stablecoin sale as the lender hasn’t established ownership of the assets, creditors have said

article-image

Former Celsius CEO Alex Mashinsky | Source: Shutterstock

share

key takeaways

  • Celsius filed a motion to sell stablecoins in its treasury last month, but a court has yet to approve it
  • State regulators in multiple states have already filed objections over the potential sale

Celsius’ committee of unsecured creditors is taking another swing at the embattled crypto lender — this time over its plans to cash out its stablecoins.

On Sept. 15, Celsius asked the court for permission to offload its stablecoin holdings to fund operations. Joshua Sussberg, the lender’s lawyer, said the firm held 11 different types of stablecoins worth $23 million but didn’t divulge which ones they were or how the firm acquired them.

In its filing, Celsius noted “any stablecoin held by the Debtors’ postpetition activity constitutes property of the Debtors’ estate” and the “proceeds generated by the sale of stablecoin also constitutes property of the Debtors’ estate.”

The firm’s unsecured creditors have objected to that request, asking the court to deny the sale on the grounds that Celsius hasn’t established ownership of the assets, according to a motion filed on Tuesday.

Celsius creditors grapple with ‘not your keys, not your coins’

Since Celsius filed for bankruptcy in July, the risks around centralized crypto lending became clear as investors grew conscious of its terms of service. One key legal question in the firm’s initial days of bankruptcy proceedings was “are the cryptoassets in Celsius’ possession property of the estate?”

In its disclosures, nowhere does Celsius refer to the digital assets on its platform as customer property (not your keys, not your coins). It also states that insolvency doesn’t guarantee the return of funds.

“In the event that you, Celsius or any Third-Party Custodian becomes subject to an insolvency proceeding, it is unclear how your Digital Assets would be treated and what rights you would have to such Digital Assets,” it explains in the terms of use.

Celsius’ creditors are fighting the lender’s reasoning, arguing it has “not met their burden to establish which (if any) crypto assets constitute property of the estate.”

“Simply put, until the Debtors provide sufficient evidence to establish that they own the stablecoin they are seeking to sell, they should not be permitted to sell those assets,” they said.

In case Celsius isn’t able to demonstrate ownership, an alternative would be for it to prove an “immediate need” to sell stablecoins; and approval should ensure the affected account holders receive adequate protection, the committee said.

State regulators from Washington, Wisconsin, Vermont and Texas had earlier filed objections to the crypto lender using its claimed stablecoins on similar grounds.

A hearing on the matter is scheduled for Nov. 1 at 11:00 am ET.

The creditors’ committee has often spoken out against Celsius’ actions in the wake of its bankruptcy, seeking to pursue investigations against former CEO Alex Mashinsky and other key insiders.

Mashinsky stepped down from his CEO position after the committee called for his removal in September. The group has also said it would look into the conduct of other key Celsius insiders including their “problematic asset deployment decisions.”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

HYATT REGENCY SALT LAKE CITY

TUES, OCT. 8, 2024

Guided by the expertise of Blockworks Research Analysts team, this one day event will feature senior leaders, entrepreneurs, and developers from across the crypto industry. Attendees will have the opportunity to participate in an immersive experience to explore the latest trends, […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

hivemapper.jpeg

Research

We believe crypto market participants overlook Hivemapper’s fundamental potential due to a poor understanding of both the niche map data market and Hivemapper’s positioning relative to incumbents. Hivemapper’s token model catalyzes both a cost and product advantage via unmatched map freshness and near real-time accuracy, which is its wedge into a market characterized by stale data and high data collection costs. Its current and potential future product suite may represent one of the strongest possibilities for PMF in crypto today.

article-image

The Fidelity Ethereum Fund, like other proposed ETH ETFs, seeks to stake a portion of its assets, according to the firm’s Wednesday registration statement

article-image

The DAO first voted on enabling SAFE transfers over a year ago

article-image

The final Bitcoin halving, where the mining reward becomes smaller than one satoshi, is expected to occur in 2140

article-image

The Department of Justice and Commodity Futures Trading Commission announced back-to-back lawsuits against KuCoin Tuesday

article-image

Judge Failla found that Coinbase didn’t operate as an unregistered broker in offering its wallet service

article-image

A fund by Laser Digital offers investors exposure to the Polygon network, while a new 21Shares ETP focuses on staking rewards from Toncoin