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The DoJ raises objections, but Celsius intends to resume withdrawals and offer stablecoins

The objection asks that Celsius proceedings be postponed until the independent examiner reports on the company, which is expected to be submitted within the next several months.

Photo by GuerrillaBuzz Crypto PR / Unsplash

The motion for Celsius (1) to reopen withdrawals for picking clients and selling its stablecoin assets has been opposed by the Department of Justice (DOJ) (2). The DOJ claims that Celsius's financial situation is opaque and that important decisions like these shouldn't be made until the independent examiner's report has been submitted.

The Texas State Securities Board, the Texas Department of Banking (3), and the Vermont Department of Financial Regulation objected to Celsius selling its stablecoin holdings last week and claimed there was a possibility the company might use the proceeds to resume operating in violation of state law. This action by the DOJ only adds to those objections.

In addition, a U.S. Trustee for the DOJ, William Harrington (4), outlined an objection to Celsius for opening withdrawals to its custody and withholding customers in a filing on September 30 with the Bankruptcy Court for the Southern District of New York, citing a lack of transparency over the firm's financials.

In the filing, Harrington also made the case that such withdrawals shouldn't be permitted until the independent examiner's report on Celsius's operations is finished.

However, the withdrawal request, which tries to prematurely disburse money to one set of creditors before thoroughly understanding the debtors' bitcoin holdings, shall be refused after the Examiner Report is filed.

Additionally, the DOJ voiced opposition to the prospective stablecoin sell-off and cited similar worries expressed by Texas and Vermont regulators that Celsius' motion does not specifically describe what effects such distribution or sale would have on the business ahead.

The petition states that the stablecoin motion seeks to liquidate the debtors' stablecoins without disclosing information about ownership, segregation, or the effect of such a sale on subsequent distributions to creditors who may have stablecoins on deposit with the debtors.

However, according to Harrington, the United States Trustee chose Shoba Pillar as the examiner on September 29. The New York Bankruptcy Court approved the choice (5). The examiner's report on Celsius must be completed and filed by Pillay within two months and include a detailed list of the company's assets and liabilities.

In essence, Harrington argued that Celsius' motions should not be taken into consideration until after the examiner's report has been submitted and that any distribution or sale must be postponed until interested parties, the United States trustee, and the Court can determine the value of Celsius' liabilities and claims against it, as well as its assets, and what the debtor intends to do with its assets to pay its creditors.

The principal investor in Celsius and the inventor of the cryptocurrency investing platform BnkToTheFuture, Simon Dixon (6), anticipated that the company would attempt to pay off its debts using Celsius CEL tokens as part of a reorganization plan but that regulators would eventually reject this plan.

If such a situation arises, Dixon anticipates a bidding war for Celsius's assets, comparable to the previous $1.3 billion asset auction of Voyager Digital, which FTX won.