SEC Raises Objections to Celsius Network’s Restructuring Plan Involving Coinbase

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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Texas Objects to Binance.US and Voyager Digital Deal

The State Securities Board and Department of Banking of Texas have filed an objection to the proposed deal between Binance.US and crypto lender Voyager Digital, which filed for bankruptcy in the US in December 2021. The objection, filed on February 24, cites “inadequate” disclosures in Binance.US’s terms of service and restructuring plan, including the failure to inform unsecured creditors that they may only receive a recovery rate of 24-26% under the plan, compared to the 51% they would receive under Chapter 7.

Binance.US had disclosed its agreement to purchase Voyager Digital’s assets for $1.022 billion in December, a move that was expected to significantly expand its presence in the US crypto market. However, the objection by the Texas regulatory bodies could pose a major obstacle to the deal.

The objection raises concerns that the proposed transaction may not be in the best interest of Voyager Digital’s creditors, who may receive significantly less than they would under the Chapter 7 process. In addition, the objection points out that the disclosures provided by Binance.US may not be sufficient to enable creditors to make an informed decision about whether to support the proposed deal.

Binance.US has not yet commented on the objection, but the company is likely to face additional regulatory hurdles in the US as it seeks to expand its operations. The objection by the Texas regulatory bodies highlights the challenges that crypto firms may face in navigating the complex and evolving regulatory landscape in the US, where different states may have different rules and requirements.

Overall, the objection by the Texas State Securities Board and Department of Banking to the Binance.US and Voyager Digital deal underscores the importance of thorough disclosures and transparency in the crypto industry. As regulators continue to scrutinize the sector, it will be important for companies to provide clear and comprehensive information to all stakeholders in order to build trust and confidence in the market.


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