Texas State Securities Board objects to Celsius attempt to sell stablecoin
The Texas State Securities Board (SSB) and the Texas Department of Banking (DOB) object to Celsius’ Motion Seeking Entry of an Order (I) Permitting the Sale of Stablecoin in the Ordinary Course and (II) Granting Related Relief.
The relevant documents were filed by Texan authorities on September 29, 2022 with the New York Southern Bankruptcy Court.
The regulators note that the Debtors seek to sell and/or exchange stablecoin before they’ve filed Schedules and Statements, and before the Court has determined whether such assets are even property of the bankruptcy estate. The Debtors fail to disclose in the Motion how much stablecoin will be sold, and how the monetization of the stablecoin ultimately benefits the bankruptcy estate and the many consumer creditors of the Debtors.
Further, the Debtors seek to “sell and/or exchange any stablecoin, whether currently held or received in the future, on a postpetition basis consistent with prepetition practices…” Texas is extremely concerned by the Debtors’ request for an order that allows ambiguously broad authority to sell and/or exchange the assets. Texas’s concern is heightened by the fact that the Debtors’ “prepetition practice” involves admittedly problematic decisions, using the mined Bitcoin to repay intercompany loans, potential mismanagement, and a continued failure to comply with state regulatory requirements.
Celsius previously sought permission to monetize mined bitcoin, including the ability to not only sell the assets, but permission to hypothecate, assign, invest, use, transfer, or otherwise dispose of mined bitcoin. That request prompted the filing of objections by several parties, and ultimately an agreement limiting the Debtors’ ability to access the mined bitcoin. Debtors now again seek troublingly broad permission to sell assets insufficiently defined for purposes that are also insufficiently defined.
Based on these significant concerns, Texas requests that the Celsius’ Motion be denied.
Let’s recall that Celsius commenced Chapter 11 proceedings on July 13, 2022, and continues to operate its businesses as debtors-in-possession pursuant to sections 1107 and 1108 of title 11 of the Bankruptcy Code.