Celsius: Multiple state regulators move to stop stablecoin sale, details inside

Court filings made by the states of Texas and Vermont have become the latest developments in the Celsius bankruptcy saga. 

State regulators from both states have filed separate motions, objecting to the defunct crypto lender’s proposed stablecoin sale. 

Sale Proposal

The company had requested the United States Bankruptcy Court for the Southern District of New York to permit the sale of $23 million worth of stablecoins held by them. The filing stated that proceeds from the sale would be used to fund Celsius’ operational expenses.

Objection by Texas

A motion filed by the Texas State Securities Board and the Texas Department of Banking states has requested the bankruptcy court to reject the proposed sale due to “Lack of State Regulatory Compliance” while adding that the company had failed to register with the State Securities Board.

“Texas is extremely concerned by the Debtors’ request for an order that allows ambiguously broad authority to sell and/or exchange the assets.” the filing further read. 

Alternatively, the filing stated that should the court deem it fit to grant Celsius the permission to go ahead with the sale, all proceeds from the sale be used for “the benefit of creditors of the bankruptcy estate.”

Objection by Vermont

Meanwhile, a similar motion filed by the Vermont Department of Financial Regulation states that the relief requested by the Celsius Network is “unclear and creates a risk that debtors will resume activities which violate state law.”

“It is not at all clear what the debtors intend to do with the proceeds of any such sales, whether the relief requested extends to Stablecoin denominated assets such as retail loans to consumers, and the degree to which Debtors’ use of sale proceeds will be supervised by the Court” the Vermont regulator’s filing read.

Regulators from both states pointed out that Celsius was under investigation by more than 40 state regulators and as such, have requested the bankruptcy court to quash Celsius’ request in the spirit of transparency and in the creditors’ interest. 

Earlier this month, regulators from Vermont had alleged that Celsius had been insolvent since 2019 while leveling accusations of operating like a Ponzi scheme. 

Objection by state regulators came just days before the bankruptcy court was set to hear arguments from Celsius’ attorneys in order to accept or decline the sale of stablecoins. The hearing is set for 6 October.

The month of September has been eventful for the Celsius Network, and not in a good way. The company has been served to cease and desist orders by multiple states including California, New Jersey, Kentucky, and Alabama.

Earlier this week, CEO Alex Mashinsky announced that he was stepping down from his role.