SEC Raises Objections to Celsius Network's Restructuring Plan Involving Coinbase
Jessie A Ellis Sep 26, 2023 11:50
The U.S. Securities and Exchange Commission (SEC) has filed a limited objection to the Chapter 11 restructuring plan of crypto lending platform Celsius Network. The objection, dated September 22, 2023, specifically targets the company's proposed arrangement with Coinbase for distribution services. The SEC is also currently engaged in a lawsuit against Coinbase, adding another layer of complexity to the situation.
Key Takeaways
SEC files limited objection against Celsius Network's restructuring plan.
Concerns raised over the company's proposed engagement with Coinbase.
SEC's ongoing lawsuit against Coinbase cited as complicating factor.
Next bankruptcy court hearing scheduled for October 5, 2023.
Background and Timeline
Celsius Network filed for Chapter 11 bankruptcy after announcing a $14 million agreement with Core Scientific, a mining company. Since filing for bankruptcy in July 2022, Celsius has reportedly failed to meet its payment obligations to Core Scientific. The restructuring plan has undergone several amendments since its initial filing in March 2023, with the fourth iteration submitted in August 2023. The bankruptcy court has yet to approve the plan, and the next hearing is scheduled for October 5, 2023.
SEC's Concerns
The SEC's limited objection focuses on Celsius Network's proposed engagement with Coinbase, which is intended to act as a Distribution Agent for international customers under the restructuring plan. The SEC argues that the role of Coinbase in the arrangement "goes far beyond the services of a distribution agent," potentially implicating brokerage and master trading services. These services are central to the SEC's ongoing lawsuit against Coinbase, initiated in June 2023. The SEC has reserved the right to object further based on the outcome of this and other related cases.
Coinbase's Response
Coinbase CEO Brian Armstrong and Chief Legal Officer Paul Grewal took to social media to express their support for Celsius Network. They questioned why the SEC would object to a "trusted US public company" taking on the role of distributing assets back to Celsius customers. The statement raises questions about the SEC's motives and adds another dimension to the ongoing legal complexities.
Implications and Next Steps
The SEC's objection could potentially delay or alter the terms of Celsius Network's restructuring plan. It also raises questions about the regulatory landscape for crypto companies engaging with traditional financial institutions. The bankruptcy proceeding is set to continue, with the next hearing scheduled for October 5, 2023. The SEC reserves the right to object further based on the outcome of this and other related cases.
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