SEC Objects to Celsius Network’s Reorganization Plan, Citing Coinbase Lawsuit
The United States Securities and Exchange Commission (SEC) has voiced its objection to Celsius Network’s proposed reorganization plan, pointing to its ongoing legal battle with crypto exchange Coinbase.
In a filing made on September 22 in the U.S. Bankruptcy Court for the Southern District of New York, the SEC filed a limited objection and reserved its rights over Celsius’ recently proposed restructuring plan. This plan, the fourth revision of the bankruptcy plan, was submitted on August 15, following an earlier proposal in March. However, it has yet to receive approval.
The objection from the SEC stems from a supplement to the reorganization plan that proposed a distribution services agreement with Coinbase. Celsius Network sought to file this agreement under seal. The SEC’s objection argues that this deal may require Coinbase to go beyond the role of a distribution agent, potentially providing services that are at the heart of the commission’s civil suit against Coinbase, which was filed in June.
In its filing, the SEC stated, “The Debtors have confirmed that they do not intend for Coinbase to provide brokerage services to the Debtors, despite the language in the Coinbase Agreements to the contrary. However, this Court should not be asked to approve a deal where the material terms are missing or inconsistent.”
Celsius Network’s restructuring plan has undergone multiple revisions since March, while Coinbase is currently dealing with an SEC lawsuit for allegedly offering unregistered securities. Coinbase CEO Brian Armstrong and Chief Legal Officer Paul Grewal expressed their support for Celsius Network’s efforts in a tweet on September 25, stating, “Coinbase is proud to engage with Celsius to distribute crypto back to its customers. I wonder, why would the SEC object to a trusted US public company taking on this role?”
The bankruptcy court filing by Celsius follows the recent announcement of a deal with Core Scientific. In this agreement, Core Scientific agreed to sell a mining data center to Celsius in exchange for $14 million in cash and the settlement of all existing litigation between the two companies. However, Core Scientific claimed that Celsius had defaulted on its payments since filing for bankruptcy in July 2022.
In August, the bankruptcy court approved Celsius Network’s decision to distribute digital ballots for voting on the restructuring plan in October. The next hearing in the bankruptcy case is scheduled for October 5.
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