The battered Celsius Network is looking to make moves that would appease many investors angry with the state of the company’s operations. But, it seems this move won’t come easily. In an effort to satiate clients whose assets have been caught in limbo for much of the year, Celsius is trying to lift its asset freeze. But, there’s a list of government bodies campaigning to ensure that doesn’t happen. This week, that list grows larger. The Department of Justice (DOJ) is petitioning against the move wanted by hundreds of thousands of Celsius users.
In early September, bankrupt company Celsius moved to unfreeze assets it had frozen back in June, right as the crypto market imploded and the company fell into its debt hole. Over 500,000 clients of the company have been unable to pull their holdings from the company’s services. This means they’ve had to watch their prices tank without being able to exit those positions.
The move would obviously be seen as positive for the fed-up investors who’ve been cut off from their assets. But, it isn’t coming without its barriers. Attorneys from the DOJ’s U.S. Trustee Program are filing objections with the bankruptcy court to Celsius’ attempt to unfreeze the assets.
The filing complains that Celsius is remaining vague with its plan. As of now, the company only wants to return assets to customers with “pure custody assets.” These attorneys allege Celsius has not done a sufficient job of defining what this means. Moreover, it asserts that with many questions at hand regarding debtors’ cryptocurrency holdings, it wouldn’t be appropriate to allow Celsius to begin moving assets around.
Celsius Network Facing Difficulty While Trying to Reorganize
This complaint isn’t the first filed against the company during its reorganizing. The DOJ objection comes just after others from finance regulators in Vermont and Texas. Those complaints deal with a different attempt by Celsius to move assets around.
Alongside its filing to unfreeze some of its clients’ assets, the company is also trying to sell of $23 million of stablecoin holdings. Two Texas finance agencies and one Vermont agency filed objections to this move. The bodies point out there are more than 40 states investigating Celsius’ activities prior to its bankruptcy.
It would thus be inappropriate, according to these court documents, to allow Celsius to sell off assets during the investigations. Not to mention, it hasn’t disclosed its plans for the money it makes on the sale. The DOJ’s complaint also touches on these filings. It calls Celsius’ motion a request for “troublingly broad permission,” given its vagueness over the terms of and plans after the sale.
The company is dealing with woes outside of the bankruptcy court, too. Founder and first chief executive Alex Mashinsky stepped down suddenly from his CEO position last week, sowing a bit of turmoil. And, it has come to light this week that he had made some suspicious moves prior to the company’s bankruptcy proceedings. Mashinsky allegedly withdrew $10 million from the company’s lending service just prior to freezing assets.
As Celsius points out in its initial filing, a flood of withdrawals would disproportionately benefit the earliest to pull their assets. This knowledge played into its decision to freeze withdrawals. Mashinsky knowingly pulling his own assets before freezing clients’ assets is thus a hugely controversial revelation.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
