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.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

kamino cover.jpg

Research

Kamino has solidified its position as the leading money market on Solana and is emerging as a DeFi bluechip. Although DeFi competition is fierce, Kamino has kept iterating on its product to provide the best-in-class UX, paired with a robust risk management framework and battle-tested infrastructure. Given the rollout of Kamino Lend V2, the protocol may scale aggressively over the coming months, penetrating previously untapped markets in Solana DeFi.

article-image

Why that the bull market might not start until 2025

article-image

August’s annual headline figure came in at 2.3% after an upward revision Thursday, so things are moving in the right direction 

article-image

MSTR’s stock price was roughly $248 at 2 pm ET Thursday

article-image

Ever since rates came off zero and fiscal deficits exploded, markets have started paying close attention to how the government is funding itself

article-image

Solana memecoins are collectively at an all-time high

article-image

Optimistic rollups like Optimism, Arbitrum and Base are seeing rapid adoption relative to zk rollups