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

Unlocked by Template.png

Research

RTK networks are critical to enabling a world of ubiquitous autonomous drones, vehicles, and industrial robots. We believe the GEOD token enables both a cost and product advantage for the GEODNET RTK network, which will allow it to out-compete multi-billion dollar incumbents Trimble and Hexagon.

article-image

SOL has climbed more than 2,000% in the past two years

article-image

MicroStrategy founder Michael Saylor alluded to Marathon’s CEO during a X Spaces on Tuesday

article-image

Crypto’s calls are equally as juiced as puts, creating a “smile” in the volatility surface

article-image

Turns out that owning the end-user via a crypto wallet is quite a prosperous business

article-image

The announcement followed growing speculation that Gensler would announce his exit before Trump takes office next year

article-image

HashKey Capital’s Jupiter Zheng highlighted three success areas he’s watching: Ethereum, Solana and certain tokens in DeFi