Celsius asks Bankruptcy Court Permission to Sell It's Stablecoins
"Celsius Networks, a crypto lending company that had frozen withdrawals in June and has been proceeding through Chapter 11 bankruptcy since July, asked the United States Bankruptcy Court for the Southern District of New York for permission to sell its stablecoin holdings" [Attlee, D. Celsius requests permission to sell off its stablecoins. (Accessed September 16, 2022)]. "In addition, the lender company states it will sell its both existing and the future stable coins which are yet to come" [Angel, J. Celsius Network Submits a Request To Sell Its Stablecoin Holdings Worth About $23M. (Accessed September 16, 2022)].
A Notice of Hearing on Debtors' Motion Seeking An Order (I) Permitting the Sale of Stablecoin in the Ordinary Course and (II) Granting Related Relief was filed by Celsius' lawyers Kirkland & Ellis, LLP on September 15, 2022.
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"On a clear note, the main intention of this sale by Celsius is to fund its Chapter 11 case, filed 2 months ago [...] Now the bankrupt crypto lender, Celsius is waiting for its hearing for the case on October 6th, 2022. As all the relevant documents are submitted to the court, a legal procedure about the stablecoin sale will be discussed. In addition, the disclosed documents reveal that Celsius possesses almost 11 different forms of stablecoin worth $23 million. (emphasis added) [Angel, supra].
If sold, these funds would go to support Celsius’ current operations. Citing section 363 of the Bankruptcy Code, the filing notes: 'Section 363 of the Bankruptcy Code is designed to strike a balance between allowing a business to continue its daily operations without excessive court or creditor oversight and protecting secured creditors and others from dissipation of the estate’s assets.'
[Attlee, supra].
"Celsius recently filed a motion, pledging to partially return money to customers. However, it would only apply to Custody and Withold Accounts and for custody assets worth $7,575 or less in value. The move drew criticism from some industry leaders, as the limitation means that only $50 million out of $210 million could be released" [Attlee, supra; see, also Attlee, D. Law Decoded, Aug. 29–Sep. 5: Celsius is ready to give money back, but not much. (Accessed September 16, 2022)].
But Celsius' problems don't end there. "[O]n Aug. 31, an ad hoc group of 64 custodial account holders filed a complaint to recover their assets. The plaintiffs noted that Celsius has not honored any withdrawals from any programs,' including custody services. According to the complaint, that contradicts the 'plain language of the debtors’ terms of use,' as they provide that title to custody assets 'always remains with the user.” [Attlee, supra].
As well, most recently, by Order filed September 14, 2022, "U.S. Bankruptcy Judge Martin Glenn has signed off on a request to appoint an examiner in the Celsius case [...] [T]he order notes that the examiner’s investigation will look into Celsius’ digital assets, tax payment procedures and the current status of its mining business following calls for greater transparency. The examiner will also look into why there was a change in account offerings in April, resulting in some customers being moved from the Earn Program to Custody Services while others were moved to a 'Withhold Account” [Huigsloot, L. Celsius bankruptcy judge gives the nod for independent examiner probe. (Accessed September 16, 2022)].
"This unbearable case affected a large number of individual investors to face a massive loss at that time" [Angel, supra].
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