The US Securities and Exchange Commission (SEC) is against Coinbase’s current involvement in Celsius’ bankruptcy plan.
Celsius, a cryptocurrency lender, originally filed for bankruptcy in July 2022 after its net worth plummeted by more than 99% and it was unable to fulfill customer withdrawals.
The bankrupt lender’s latest Chapter 11 plan involves using Coinbase as an agent to distribute crypto back to its former customers.
However, the SEC filed a filing last week raising concerns about the choice of a distribution agent.
The regulator’s lawyers argue:
“The Coinbase Agreements extend well beyond the services of a distribution agent to include brokerage services and master trading services that implicate many of the concerns raised in the SEC District Court proceedings against Coinbase…
There appears to be an additional agreement with Coinbase, which the debtors intend to file under seal, but it has not been made available to SEC staff.
The Debtors have confirmed that they do not intend for Coinbase to provide brokerage services to the Debtors, despite language in the Coinbase Agreements to the contrary. However, this Court should not be asked to approve a deal whose material terms are missing or inconsistent.”
The SEC sued Coinbase in June, accusing the company of operating as an unregistered securities exchange, broker and clearing agency.
On Monday, Coinbase Chief Legal Officer Paul Grewal said: questioned the regulator’s opposition to his company’s involvement in Celsius’ bankruptcy plan.
“Coinbase is proud to partner with Celsius to distribute crypto back to its customers. I wonder: why would the SEC object to a trusted American public company taking on this role? We look forward to addressing this in bankruptcy court and assuming our important role in returning Celsius’ customers to health.”
Former Celsius CEO Alex Mashinsky and Roni Cohen-Pavon, the company’s former chief revenue officer, were both arrested in July.
The former executives faced several criminal and civil charges from the SEC, the Federal Trade Commission (FTC), the Department of Justice (DOJ), and the Commodities Futures Trading Commission (CFTC).
The FTC specifically accused Mashinsky of “tricking consumers into transferring cryptocurrency to the platform by falsely promising that deposits would be secure and always available.”
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