Crytocurrency

The DOJ doesn’t like that Celsius wants to reopen withdrawals and sell stablecoins.

The Department of Justice (DOJ) has said no to Celsius’s request to let some customers withdraw their funds again and to sell its stablecoin holdings.

The DOJ says that Celsius’s finances are not clear and that important decisions like this one shouldn’t be made until the independent examiner’s report is in.

The DOJ’s move comes after the Texas State Securities Board, the Texas Department of Banking, and the Vermont Department of Financial Regulation all filed objections last week. All three are against Celsius selling its stablecoin holdings because there’s a chance the company could use the money to start doing business again in a way that breaks state laws.

In a Sept. 30 filing with the Bankruptcy Court for the Southern District of New York, William Harrington, a U.S. Trustee for the DOJ, explained why he didn’t want Celsius to let its “custody” and “withhold” customers’ withdrawals. He said that the company’s finances were not clear enough.

Harrington says in the filing that withdrawals of this kind shouldn’t be allowed until the independent examiner’s report on how Celsius does business is finished:

“The motions are too early, so they should be turned down until the examiner report is filed. First, the Withdrawal Motion wants to send money quickly to one group of creditors before the debtors’ cryptocurrency holdings are fully understood.
The DOJ has also opposed a possible stablecoin sale, citing the same worries as Texas and Vermont regulators that Celsius’s motion doesn’t clearly explain “what effect such a distribution or sale would have” on the business going forward.

“Second, the Stablecoin Motion seeks to liquidate stablecoins held by the Debtors without providing information about ownership, segregation, or the effect of such a sale on future distributions to creditors who may have stablecoins on deposit with the Debtors,” the filing says.

Independent examiners appointed
Harrington says that on September 29, the “United States Trustee appointed Shoba Pillay” as the examiner, and on the same day, the New York Bankruptcy Court approved the appointment.

Pillay will have about two months to put together and file an examiner’s report on Celsius. This report should show the company’s assets and debts in a clear way.

Harrington basically said that Celsius’s motions shouldn’t even be looked at until well after the examiner’s report has been filed. He said that “any distribution or sale should be delayed until interested parties, the United States Trustee, and the Court are able to make a determination” on the value of Celsius’s liabilities, claims against it, assets, and what “the debtor intends to actually pay its creditors.”

Simon Dixon, the founder of crypto investment platform BnkToTheFuture, which was Celsius’s biggest investor, said on Twitter on Oct. 1 that Celsius will try to pay its creditors in Celsius (CEL) tokens as part of a reorganisation plan that “won’t get past regulators and regulators will file motions to reject” it.

If this happens, Dixon thinks it will start a bidding war for Celsius assets, like the recent $1.3 billion auction for Voyager Digital assets, which was won by FTX US.

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