Celsius Creditors Move Against Company’s Proposal to Sell Mined Bitcoins
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Celsius, the embattled crypto lending platform that recently filed for bankruptcy, appears to have entered into another dispute. In an effort to salvage as many of its assets as possible, the company’s creditors are now questioning Celsius’ plan to sell mined Bitcoin tokens.
Keep Bitcoins on Lock
In a court filing shared earlier this week, a committee representing creditors for the Celsius Network explained their objection to the company’s proposal to sell Bitcoins mined by its Celsius Mining subsidiary.
When Celsius filed for bankruptcy protection in July, the company claimed that it would use its Bitcoin mining operation to repay creditors and its clients. The company already got approval from a judge to spend about $5 million towards kickstarting its mining operation. However, the proposed Bitcoin sale has drawn criticism from federal regulators and Celsius’ creditor committee.
Besides its objection to the sale of mined Bitcoins, Celsius’ creditor committee has also confirmed that it would launch a “broad-ranging investigation” into the company – one which could end up with them invoking the Bankruptcy Rule 2004. If approved, the rule could open the door for discovery processes and possibly even testimonies from interested parties – similar to a civil lawsuit.
With Celsius still dealing with the aftermath of its bankruptcy processes, a court case of any type, especially one against its creditors, is not what the company needs at this time.
Celsius’ Very Bad Week
The debacle surrounding mined Bitcoins is just the latest in what appears to be an ongoing wave of bad news for Celsius. On August 10, the Department of Financial Protection and Innovation of California (DFPI) filed a desist and refrain order against the company, explaining that its offering of crypto interest accounts violates local laws. The DFPI, which already took similar actions against other lenders like Voyager Digital and BlockFi, is now looking to restrict Celsius’ operations across the state of California.
Amongst other things, the DFPI claimed that the crypto lending platform and its CEO, Alex Mashinsky, had made “material misrepresentations and omissions” in its offer of interest-bearing crypto accounts. Most particularly, the agency took issue with the company’s statement of risks in depositing crypto.
Celsius allegedly stated that third-party custody services might lose access to coins, and lenders would be unable to return the company’s collateral on time. According to the agency, all of these risks make Celsius an unhealthy investment platform that puts customers’ funds at risk.
Celsius was also accused of not qualifying all deposited cryptocurrencies as securities in compliance with the Corporations Code Section 25110. A company requires a permit from the DFPI to sell these kinds of securities in California – a process that Celsius appears to have skipped.
At the same time, the crypto lending platform is looking to restructure its assets amid its bankruptcy proceedings. This week, blockchain giant Ripple Labs confirmed that it would be interested in purchasing Celsius’ assets either in whole or in part.
According to a report from Reuters, lawyers for Ripple Labs have confirmed that they would like to be involved in the bankruptcy proceedings. Ripple, which is also facing a months-long securities fraud case with the Securities and Exchange Commission (SEC), has reportedly been looking for strategic merger and acquisition deals to scale in the future. Although the lawyers have refrained from saying whether they would be looking to purchase Celsius outrightly, that isn’t necessarily off the table.
Buy Crypto at eToro from just $50 Now!