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Celsius Withdrawals Must Remain Closed: DOJ

A U.S. Trustee at the Department of Justice has objected to Celsius' plans to reopen withdrawals, arguing that there are still extensive investigations to complete before distributing any funds.

Celsius Withdrawals Must Remain Closed: DOJ
Shutterstock cover Satheesh Sankaran

Key Takeaways

  • On September 1, Celsius filed for court approval to release $225 million of locked funds to creditors.
  • Now, U.S. Trustee William K. Harrington has filed an objection to that request and called it premature.
  • Harrington says that funds should not be distributed until is is known what Celsius owes, and to whom.

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A U.S. Trustee reporting to the Department of Justice has argued to the court that Celsius should not be allowed to initiate customer withdrawals pending more extensive investigation.

U.S. Trustee Objects to Celsius’ Plans

Celsius’ plans to reopen withdrawals may be delayed due to objections from a member of the U.S. Trustee Program, which oversees the administration of bankruptcy cases.

On September 1, Celsius requested authorization to release $225 million in its custody program and withhold accounts. Now, that request faces resistance from a member of the Department of Justice’s U.S. Trustee Program.

In a September 30 court filing, U.S. Trustee William K. Harrington objected to Celsius’ plans to “reopen withdrawals for certain customers with respect to certain assets” held in custody and withhold accounts.

Harrington called Celsius’ plans to release those funds “premature.” He added that the firm’s request would “impulsively distribute” funds without fully understanding its crypto holdings and inter-account crypto transfers. It would also ignore the relationship between the company’s balance sheet and cryptocurrency deposited by creditors.

Harrington added that Celsius should not be able to release funds until an Examiner Report has been filed. That report will detail whether the company commingled funds and why there was a change in its account offerings in April 2022.

Harrington argued that it is impossible to determine how many creditors must be paid, which crypto assets are owed, and how much is owed.

He then warned that releasing funds could “inadvertently impact or limit distributions to other creditors.”

In related news, Texas and Vermont regulators objected Thursday to Celsius’ plans to sell $23 million of stablecoin holdings. Harrington’s filing also objected to this sale.

Celsius initially froze withdrawals on June 12 this year and filed for bankruptcy weeks later. Those events have left users without access to their crypto for three months.

While customers may be disappointed that withdrawals could be delayed further, it is not clear whether the U.S. Trustee’s objection will be approved by the court.

The matter will be discussed in a hearing on October 6.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies.

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