Department of Justice has reacted negatively to Celsius's plans to resume withdrawals and sell stablecoins
October 3, 2022 8:11 AM
The objection asks for a stay of Celsius motions until the independent examiner report on the company is submitted in the coming months.
Celsius has filed a motion to reopen withdrawals for certain customers and sell its stablecoin holdings, but the Department of Justice (DOJ) has filed an objection to the move.
The DOJ claims that there is a lack of transparency regarding Celsius' financials and that this decision should be postponed until the independent examiner report is submitted.
The Justice Department's move follows objections lodged by the Texas State Securities Board, the Texas Department of Banking, and the Vermont Department of Financial Regulation last week. Each of them believes there is too much of a chance that Celsius will use the money from the sale of its stablecoin holdings to start doing business again despite state bans on the practice.
U.S. Trustee for the Department of Justice William Harrington filed an objection to Celsius allowing withdrawals to its "custody" and "withhold" customers with the Bankruptcy Court for the Southern District of New York on September 30. His main concern was the company's lack of transparency regarding its financials.
Until an independent examiner's report on Celsius's business operations is finished, Harrington argues in the filing, such withdrawals should not be allowed.
"Until the filing of the Examiner's Report, the Motions should be denied as premature. Before fully understanding the Debtors' cryptocurrency holdings, the Withdrawal Motion seeks to make a hasty distribution of funds to one group of creditors."
The Department of Justice has also spoken out against a possible stablecoin sale, echoing the worries of regulators in Texas and Vermont that Celsius' motion doesn't clearly highlight "how much effect such a transfer or sale would've had" for the firm.
"Second," the filing states, "the Stablecoin Motion strives to liquidate stablecoins retained by the Debtors without providing details regarding ownership, segregation, or the effect of such sale on subsequent distributions to creditors that may have stablecoins on deposit with the Debtors."
Appointment of an Objective Examiner
Harrington claims that on September 29, the "United States Trustee appointed Shoba Pillay" as the examiner, and that her appointment was sanctioned by the New York Bankruptcy court the same day.
In about two months, Pillay will submit an examiner's report on Celsius that should detail the company's assets and liabilities in detail.
In summary, Harrington argued that Celsius' movements should not even be taken into consideration until after the examiner report has been submitted, stating that "any distribution or sale must be delayed until relevant parties, the United States Trustee, and the Court are able to make a decision" on the value of Celsius' liabilities, claims against it, its assets, and what "the debtors proposes to certainly pay off its creditors.
On October 1, Simon Dixon, founder of crypto investment platform BnkToTheFuture and a major investor in Celsius, tweeted that the company's plan to repay creditors in Celsius (CEL) tokens "won't get past regulatory bodies & regulators will file movements to dismiss" the restructuring.
Dixon predicts that this will lead to a bidding war for Celsius assets, much like the one that occurred when Voyager Digital sold its assets for $1.3 billion, ultimately being acquired by FTX US.