DOJ objects to Celsius plans to reopen withdrawals and sell stablecoins

The Department of Justice (DOJ) has filed an objection to Celsius’ motion to reopen withdrawals for select customers and sell their stablecoin holdings.

The DOJ claims that the state of Celsius’ finances lacks transparency and that key decisions like this should not be considered until the independent examiner’s report has been submitted.

The DOJ’s move adds to objections filed last week by the Texas State Securities Board, the Texas Department of Banking and the Vermont Department of Financial Regulation. All three oppose Celsius selling its stablecoin holdings, saying there is a risk the company could use the capital to resume operations in violation of state laws.

In a Sept. 30 filing before the Bankruptcy Court for the Southern District of New York, DOJ United States Trustee William Harrington raised an objection to Celsius opening withdrawals to its “custody” and “retention” customers, citing a lack of transparency about the company’s finances.

Harrington argues in the filing that those withdrawals should not be opened until the independent examiner’s report on Celsius’ business operations is complete.

“The motions are premature and should be denied until after the examiner’s report is filed. First, the motion to withdraw seeks to impulsively distribute funds to a group of creditors before a full understanding of the debtors’ cryptocurrency holdings.

The DOJ has also objected to a potential sale of stablecoins, highlighting similar concerns from regulators in Texas and Vermont that Celsius’ motion does not specifically describe “what impact such a distribution or sale would have” on the future of the business

“Second, the Stablecoin motion seeks to liquidate the stablecoins held by the debtors without providing information about the ownership, segregation, or impact of that sale on subsequent distributions to creditors who may have stablecoins on deposit with the debtors “, says the presentation.

An independent examiner is appointed

According to Harrington, the “United States trustee appointed Shoba Pillay” as the examiner on September 29, and the New York bankruptcy court approved the appointment on the same day.

Pillay will have roughly two months to prepare and submit an examiner’s report on Celsius, which he hopes will provide a clear breakdown of its assets and liabilities.

Harrington essentially stated that Celsius’ motions should not even be considered until long after the examiner’s report is filed, noting that “any distribution or sale should be postponed until interested parties, the United States Trustee, and the court may make a determination.” of the value of Celsius’ liabilities, the claims against him, his assets, and what “the debtors actually intend to pay their creditors.”

Related: Crypto Biz: Voyager Digital Auction Is Over – Now What?

Simon Dixon, the founder of crypto investment platform BnkToTheFuture, who was the lead investor in Celsius, predicted via Twitter on October 1 that Celsius will seek to pay its creditors in Celsius (CEL) tokens as apart from a reorganization plan that eventually “won”. Fail to pass the regulators and the regulators will file motions to reject it.

If that happens, Dixon sees it sparking a bidding war for the Celsius assets, similar to Voyager Digital’s recent $1.3 billion asset auction that FTX US won.