The U.S. Securities and Exchange Commission (SEC) has raised concerns over the reorganization plans of the collapsed crypto scheme Celsius Network, citing its ongoing legal battle with crypto exchange Coinbase. On September 22, the SEC voiced its reservations to the U.S. Bankruptcy Court regarding Celsius’ fourth restructuring proposal. Coinbase Chief Legal Officer Paul Grewal took to Twitter to publicly challenge the SEC’s view.
Celsius Network Background: Celsius Network LLC, based in Hoboken, New Jersey, was a global crypto lending firm with offices in four countries. Users could deposit cryptocurrencies like Bitcoin and Ethereum into their Celsius wallets to earn interest or secure loans using their digital assets. By May 2022, the company had managed nearly $12 billion in assets and had issued $8 billion in loans. However, in June 2022, amidst volatile market conditions that saw significant drops in cryptocurrency values, Celsius halted all transfers and withdrawals. This move contributed to the company filing for Chapter 11 bankruptcy in July 2022.
Central to the SEC’s objection is a proposed agreement between Celsius and Coinbase, which the regulator believes might extend beyond mere distribution services, potentially overlapping with issues in the SEC’s lawsuit against Coinbase initiated in June. The SEC filed papers raising objections to Celsius‘s plan to distribute digital assets to customers as part of a reorganization plan through Coinbase.
Despite Celsius‘ assurances to the contrary, the SEC has called for clarity on the terms of the deal. Meanwhile, Coinbase, which is facing its own legal challenges with the SEC, expressed support for Celsius.
Coinbase is proud to engage with Celsius to distribute crypto back to its customers. I wonder, why would the SEC object to a trusted US public company taking on this role? We look forward to addressing this with the bankruptcy court and undertaking our important role to make Celsius customers whole.Paul Grewal, Chief Legal Officer Coinbase on Twitter
In other developments, Celsius has struck a deal with Core Scientific, settling past disputes with a $14 million transaction. The bankruptcy court is set to review Celsius‘ restructuring plan in a hearing on October 5.