The Department of Justice (DOJ) has submitted an objection to Celsiusโ motion to reopen withdrawals for select customers and sell its stablecoin holdings.
The DOJ is asserting that the state of Celsiusโ financials are lacking transparency, and that key decisions like this should not be considered until the independent examiner report has been filed.
The move by the DOJ adds to the objections filed last week by the Texas State Securities Board, the Texas Department of Banking, and the Vermont Department of Financial Regulation. All three are opposed to Celsius selling its stablecoin holdings, asserting thereโs a risk the firm could use the capital to resume operating in violation of state laws.
In a Sept. 30 filing with the Bankruptcy Court for the Southern District of New York, a U.S. Trustee for the DOJ, William Harrington outlined an objection to Celsius opening up withdrawals to its “custody” and “withhold” customers, citing a lack of transparency over the firmโs financials.
Harrington argues in the filing that such withdrawals should not be opened up until the independent examiner report on Celsius business operations has been completed.
โThe 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 Debtorsโ cryptocurrency holdings.โ
The DOJ has also opposed a potential stablecoin sell off, highlighting similar concerns held by Texas and Vermont regulators that Celsiusโ motion doesnโt concretely outline โwhat impact such a distribution or sale would haveโ on the business moving forward.
โSecond, 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,โ the filing reads.
Independent examiner appointed
According to Harrington, the โUnited States Trustee appointed Shoba Pillayโ the examiner on Sept. 29, with the New York Bankruptcy court approving the appointment on the same day.
Pillay will have roughly two months to prepare and file an examinerโs report on Celsius, hopefully providing a clear breakdown of its assets and liabilities.
Harrington essentially asserted that Celsiusโ motions should not even be considered until well after the examiner report has been filed, noting that โany distribution or sale should be deferred until interested parties, the United States Trustee, and the Court are able to make a determinationโ on the value of Celsius liabilities, claims against it, its assets and what โthe debtors intends to actually pay its creditors.โ
Related: Crypto Biz: The Voyager Digital auction is over โ What now?
Simon Dixon, the founder of crypto investment platform BnkToTheFuture โ which was the lead investor in Celsius โ predicted via Twitter on Oct. 1 that Celsius will look to repay its creditors in Celsius (CEL) tokens as part of a reorganization plan that ultimately โwonโt get past regulators & regulators will file motions to rejectโ it.
If such occurs, Dixon sees it sparking a bidding war for Celsius assets, similar to that of Voyager Digitalโs recent $1.3 billion asset auction that was won by FTX US.
3/9) This will drive the vultures into a bidding process where the vultures will try & buy the assets we paid for without our consent & FTX & TradFi will give us pennies on the dollar. It will be a lot worse for creditors than @investvoyager due to size of hole. pic.twitter.com/4EqspGx9iF
โ Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) October 1, 2022
