Celsius Debtors Request Court To Block Stablecoin Sales

The committee of unsecured creditors for Celsius is suing the troubled crypto lender once more, this time over its intentions to sell off its stablecoins. According to creditors, the lender hasn’t proven possession of the assets, so the court should reject Celsius’ stablecoin sale.

Celsius Intends to Liquidate Its Stablecoins

On September 15, Celsius requested authorization from the court to sell its stablecoin assets to finance operations. The firm possessed 11 distinct kinds of stablecoins totaling $23 million, according to the lender’s attorney Joshua Sussberg, who declined to say which ones they were or how the company acquired them.

Any stablecoin possessed by debtors following the filing of their petition will become part of their estate. Also, any revenues from the sale of stablecoin will become part of their estate, according to Celsius.

According to the announcement made on Tuesday, unsecured creditors of the company have objected to that request. Additionally, they asked the court to reject the sale on the grounds that Celsius hasn’t proven ownership of the assets.

Celsius Investors Wrestle to be Treated as Secured Creditors

Since Celsius declared bankruptcy in July, investors have become more aware of its terms of service.

This has made the dangers of centralized crypto lending evident. Are the crypto assets in Celsius’ possession property of the estate? This was a crucial legal concern during the company’s early bankruptcy procedures.

Celsius never refers to the digital assets on its platform as client property in its disclosures (not your keys, not your coins). Additionally, it states, insolvency does not ensure the restoration of funds. 

The conditions of use state 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.”

The lender’s justification is being contested by Celsius‘ creditors, who claim the lender “has not met its duty to prove which (if any) crypto assets constitute property of the estate.“

Simply put, they claimed, “the Debtors should not be entitled to sell such assets until they present adequate documentation to establish that they own the stablecoin they are seeking to sell.“

If Celsius is unable to show ownership, another option would be for it to establish an “urgent need” to sell stablecoins. The committee added that if this is successful, approval should guarantee that the account holders who would be impacted will be adequately protected.

Celsius Receives More Pounding From The Committee

On identical grounds, state authorities from Washington, Wisconsin, Vermont, and Texas had already objected to the crypto lender utilizing its alleged stablecoins. The matter will be heard on November 1 at 11:00 ET.

The creditors’ committee has frequently criticized Celsius’ activities after the company filed for bankruptcy, calling for more inquiries into the former CEO Alex Mashinsky and other significant insiders.

Alex resigned from his job as CEO after the committee demanded he leave back in September. Moreover, the committee stated that it would investigate the actions of other significant Celsius insiders, especially their “problematic asset deployment decisions.”