A committee of unsecured creditors stemming from the Celsius bankruptcy case has filed a motion with the court to stop the now-defunct crypto lender from selling the company’s stablecoin holdings. The written protest by the group of creditors against the sale follows objections from a slew of securities regulators filed on Sept. 29.
Creditors Object to Celsius Selling $23 Million in Stablecoins
On Sept. 15, the embattled cryptocurrency lending firm Celsius filed a motion with the bankruptcy court to get permission to sell $23 million in stablecoins. The court filing attempting to gain access to the stablecoin stash followed a leaked all-hands meeting recording that indicated Celsius wanted to attempt a revival plan. Then, two weeks after the Sept. 15 court request for the stablecoins, state securities officials from Vermont and Texas filed motions that object to Celsius acquiring the stablecoin stash.
The Texas State Securities Board (TSSB) said that Celsius’ request for the stablecoin cache was “inappropriate.” “The debtors fail to disclose in the motion how [many stablecoins] will be sold, and how the monetization of the stablecoin ultimately benefits the bankruptcy estate and the many consumer creditors of the debtors,” the TSSB objection explains.
On Oct. 25, 2022, the official committee of unsecured Celsius creditors stressed in its motion that the stablecoin sale request “should not be approved at this time.” The committee believes there’s contested ownership as specific creditors believe the coins are owned by Celsius’ customers. However, the official Celsius terms of service (ToS) explains that it is “unknown how your digital assets would be treated and what rights you would have to such digital assets in the event that you, Celsius or any third-party custodian became subject to an insolvency case.”
Moreover, the ToS further explains:
[Customers grant Celsius] all rights and title to any such assets to use in its sole discretion.
‘Not Your Keys, Not Your Coins’
Despite the fine print and bold lettering used in the Celsius ToS, the official committee of unsecured Celsius creditors thinks Celsius needs to prove that the stablecoins actually belong to the estate. The creditors want to see arguments and evidence that explicitly show the assets belong to Celsius because the creditors wholeheartedly believe the “debtors provided no evidence to support their request.”
The Celsius bankruptcy case has not been smooth and there’s been opposition to the company’s decisions nearly every step of the way. On Aug. 17, however, the court did approve the request Celsius made to obtain the company’s bitcoin holdings acquired from the firm’s mining operation.
Creditors have written letters to the court and have been pleading with the judge to release the funds held by Celsius back to the customers. As far as stablecoins, one woman who lost 50,000 USDC wrote in a letter that she believes her stablecoin assets should be treated differently during the bankruptcy proceedings.