Bankrupt lender Celsius Network has asked the court for permission to sell its stablecoin holdings, worth $23 million, according to new court filings. A hearing to discuss the proposed sale of stablecoins is scheduled for October 6, 2022 in New York.
Proceeds from the sale of stablecoins will be used to generate liquidity to help finance the operations of the debtors.
However, proceeds may not be used to repay investors immediately. “The debtors, however, continue to own stablecoins that must be liquidated to fund their operations in these Chapter 11 cases due to the stability of the market compared to other types of cryptocurrencies,” the filing stated.
Cryptocurrency crash battles started in Celsius in June 2022
In June 2022, Celsius decided to freeze withdrawals and transfers for its 1.7 million customers, citing “harsh” market conditions.
In July 2022, a former investment manager at Celsius Network filed a lawsuit against a crypto lender, accusing it of using customer deposits to manipulate the price of its crypto token. According to the lawsuit, Celsius was responsible for running a Ponzi scheme to take advantage of “gross mismanagement of customer deposits.”
Celsius has been responsible for striving to pay investors high returns as promised, mainly due to the fact that the company failed to hedge investments. This resulted in large fluctuations in value between the coins and significant losses. Celsius has also been accused of recording deposits into its cash accounts in US dollars, even if the company pays customers with tokens or other tokens.
Celsius CEO Alex Mashinsky has since presented a proposal outlining how bitcoin mining could help the beleaguered company with its financial restructuring. According to the company, bitcoin mining could be an opportunity to pay off customers, whose withdrawals have been suspended since June 12.
on the flip side
- If the proposal is approved, the actions from the sale of stablecoins will be used to fund the company’s operations, and not to repay investors.
Why should you care
Cryptocurrency crashes in 2022 rocked the crypto industry, as platforms such as Celsius, BlockFi and Voyager Digital collapsed, announcing the suspension of trading, deposit and withdrawal operations, unnerving investors. Investors’ funds worth between 1 billion and 5 billion dollars are now locked in the hands of troubled companies, inaccessible to users.
Learn about some legal developments about the Celsius crash:
Lawsuit accuses Celsius Network of fraud
Read about the threat to investors due to the cryptocurrency crash:
The cases of Celsius, BlockFi, and Voyager show why self-sovereignty should be taken seriously