The U.S. Securities and Exchange Commission (SEC) has voiced its objection to a portion of the reorganization plan proposed by bankrupt cryptocurrency firm Celsius. The plan involves the use of Coinbase, a well-known crypto exchange, as a distribution agent to return funds to former Celsius users. However, the SEC has raised concerns about Coinbase’s intended role, stating that it goes beyond the typical duties of a distribution agent.
One of the primary concerns raised by the SEC is the inconsistencies in Celsius’s statements regarding Coinbase’s involvement. While Celsius has stated that Coinbase will not provide brokerage services, the agreement with Coinbase implies otherwise. The SEC also believes that there may be an additional agreement between the two companies that they intend to file under seal. The regulator argues that if such an agreement exists, it should be disclosed to both the SEC and the court.
The SEC further points out that some of the trading services mentioned in the agreement between Celsius and Coinbase are related to the concerns raised in the SEC’s lawsuit against Coinbase filed on June 6. This raises suspicions about the nature of the agreement and its potential implications. Paul Grewal, Coinbase’s chief legal officer, responded to the SEC’s objections, expressing his firm’s commitment to assisting Celsius in distributing cryptocurrencies back to its customers. He also questioned the SEC’s opposition to the distribution plan and stated that Coinbase would address the matter within Celsius’s bankruptcy proceedings.
Celsius initially halted withdrawals in June 2022 and subsequently filed for bankruptcy a month later in July. According to Forbes, the company had outstanding debts of $4.7 billion owed to creditors, excluding institutional partners. The SEC notes that it has already initiated a securities fraud case against Celsius regarding its CEL token. The lawsuit alleges that Celsius and its former CEO, Alex Mashinksy, conducted unregistered and fraudulent security offerings involving the CEL token.
In its latest complaint related to the bankruptcy case, the SEC has asked the court to rule on whether the CEL token should be classified as a security. However, the regulator requests that the ruling’s effects be limited to the dispute over Celsius’s distribution plan. The SEC fears that a broader ruling could impede its separate securities case against Celsius, jeopardizing its ability to proceed with legal action.
With the SEC’s objection to Celsius’s plan to involve Coinbase as a distribution agent, the future of the reorganization plan remains uncertain. The court will need to consider the SEC’s concerns and evaluate the role of Coinbase in the distribution process. The outcome of the ruling regarding the CEL token’s security classification will further impact Celsius’s ability to move forward with its proposed plan.
The SEC’s objection to Celsius’s plan and their concerns about Coinbase’s involvement shed light on the complexities and potential violations in the cryptocurrency industry. The regulator is actively working to protect investors and maintain the integrity of the market. As the Celsius bankruptcy case continues and the SEC’s securities fraud case progresses, further developments will unfold, setting a precedent for the regulatory oversight of cryptocurrencies and their related entities.
Leave a Reply