Bankrupt crypto lender Celsius Network has asked the court for authorization to sell its stablecoin holdings, worth $23 million, according to new court filings. A hearing to discuss the proposed stablecoin sale is scheduled to be held on 6th October, 2022 in New York.
The proceeds generated from the sale of the stablecoins will be used to generate liquidity to help fund its debtors’ operations.
However, the proceeds may not be used to immediately pay back investors. “The Debtors, however, continue to own stablecoins that should be monetized to fund their operations in these Chapter 11 cases given their market stability compared to other types of cryptocurrencies,” the filing stated.
Celsius’ Crypto Crash Struggles Started In June 2022
In June 2022, Celsius decided to freeze withdrawals and transfers for its 1.7 million customers, citing the “extreme” market conditions.
In July 2022, a former investment manager at Celsius Network sued the crypto lender, accusing it of using customer deposits to manipulate the price of its own crypto token. According to the lawsuit, Celsius was responsible for running a Ponzi scheme to benefit itself through “gross mismanagement of customer deposits.”
Celsius was held responsible for struggling to pay investors high returns as promised, mainly due to the fact that the company had failed to hedge investments. This resulted in substantial value fluctuations among coins, and significant losses. Celsius was also accused of logging deposits onto its cash accounts in U.S. dollars, even if the firm paid customers with Bitcoin or other tokens.
Celsius CEO Alex Mashinsky has since submitted a proposed outlining how bitcoin mining could help the embattled firm to restructure financially. According to the company, bitcoin mining could be an opportunity to repay customers, whose withdrawals have been on hold since June 12th.
On the Flipside
If the motion is approved, the proceedings from the stablecoin sale will be used fund the operations of the company, not to pay back investors.
Why You Should Care
The 2022 crypto crashes shook the crypto industry, as platforms like Celsius, BlockFi, and Voyager Digital crumbled, announcing the suspension of trading, deposit, and withdrawal operations, sparking concern among investors. Investor funds worth $1bn-$5bn became locked up in the hands of the struggling companies, and inaccessible to users.
Learn about some of the legal developments around the Celsius crash:
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