DOJ Rejects Celsius Decision To Sell Assets

  • Oct 03, 2022 at 1:42 pm
  • The U.S Department of Justice (DOJ) has filed an objection to crypto lender Celsius’ decision to reopen withdrawals for select customers and sell its stablecoin assets.

    The DOJ’s objection is based upon claims that Celsius’ haven’t been transparent about its financial position, and that decisions involving asset liquidation should not be considered until the independent examiner report has been filed. The company’s move was also opposed by the Texas Securities Board, the Texas Department of Banking, and the Vermont Department of Financial Regulation.

    In July, Celsius Network filed for Chapter 11 bankruptcy at the Bankruptcy Court for the Southern District of New York after reports of liquidity issues surfaced. The crypto lender restricted customer withdrawals prior to filing for bankruptcy.

    Chapter 11 bankruptcy allows companies to continue its operations while meeting its obligations to debtors. The process is usually executed by proposing a restructuring plan which is approved by creditors and overseen by a legal team.

    “The motions are premature and should be denied until after the Examiner Report is filed. First, the Withdrawal Motion seeks to impulsively distribute funds to one group of creditors in advance of a fulsome understanding of the Debtors’ cryptocurrency holdings,” said William Harrington, a U.S Trustee for the DOJ, in the objection filed with the Bankruptcy Court for the Southern District of New York

    “Second, the Stablecoin Motion seeks to liquidate stablecoins held by the Debtors without providing information regarding ownership, segregation, or the impact of such sale on later distributions to creditors who may have stablecoins on deposit with the Debtors.”

    The United States Trustee has appointed New York Bankruptcy court approved examiner Shoba Pillay, to submit a report on the company in roughly two months. Celsius has been ordered not to sell its assets until regulators and courts are able to determine the value of its assets, liabilities, claims against both and what “the debtors intend to actually pay its creditors.”

    In July, Celsius announced restructuring plans to pay off debts owed to its customers and lenders by selling off assets the company holds. The crypto lender’s balance sheet shows a deficit of 1.9 billion and liabilities of $5.5 billion, of which $4.7 billion is owed to customers.

    Last month, founder Alex Mashinsky stepped down from his position as CEO of the company. Celsius has 1.7 million customers worldwide.