Celsius’ motion to access stablecoin faces objection from US state security officials

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Key Takeaways

  • The objection was against Celsius’ plan to sell $23 million in stablecoins as part of its efforts to access funds.
  • The Vermont Department of Financial Regulation and the Texas State Securities Board are the ones who filed the objections.
  • VDFR has stated that the motion creates a risk that the debtors will resume activities that violate state law.

On September 29, state securities officials from the Vermont Department of Financial Regulation (VDFR)  and the Texas State Securities Board (TSSB) filed objections to the bankrupt crypto lender Celsius accessing the company’s stablecoin cache. The latest development comes two days after Celsius Network CEO Alex Mashinsky submitted a letter of resignation from the company.  The objection was against Celsius’ plan to sell $23 million in stablecoins as the crypto lender petitioned the court in September to gain access to the funds.

“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 reads. Vermont’s securities regulator filing the objection has reasoned that the motion was “unclear,” adding that it creates a risk that the debtors will resume activities that violate state law.

“It is not at all clear what the debtors intend to do with the proceeds of any such sales, whether the relief requested extends to stablecoin-denominated assets such as retail loans to consumers, and the degree to which debtors’ use of sale proceeds will be supervised by the court,” the VDFR filing states.

The Terra/Luna collapse in May has led to the collapse of many big crypto firms in recent months. Celsius filed for Chapter 11 bankruptcy on July 13, 1 month after freezing withdrawals for its 1.7 million customers, citing “extreme” market conditions and listing a $1.19 billion deficit on its balance sheet.

On-chain data leading up to the bankruptcy filing has revealed that Celsius was hastily paying back the money on several of its DeFi loans to avoid getting liquidated on more than $440 million in collateralized Bitcoin. During September first week, Celsius sought to reopen withdrawals for select customers, and earlier this week, a court-appointed examiner was added to the case proceedings to look through the crypto lender’s financial paperwork.

Earlier this week, the Alabama Securities Commission ordered Celsius to explain how it is not violating state securities laws arguing that it believes Celsius violated state laws through its “Earn Rewards” program.

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Saniya Raahath
Saniya Raahath

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