In early June, the cryptocurrency lending company Celcius Network suddenly announced the suspension of withdrawals. The company filed for bankruptcy after just a month. It was found that the company had a $1.2 billion gap in its balance sheet.
The crypto lender went on to set a date for bidding of its assets after filing for bankruptcy. Following the company’s filing for Chapter 11 bankruptcy, many big players, including FTX U.S., have been displaying their interest in acquiring Celsius’s assets.
According to the most recent filing of Monday with the U.S. Bankruptcy Court for the Southern District of New York, Celsius Network has put a final bid deadline on October 17, 4 PM. The company will also be conducting an auction on October 20. The filing mentions that the sale hearing will be held on November 1 before the Chief US Bankruptcy Judge Martin Glenn.
It all went downhill for Celsius with the collapse of the Terra ecosystem, which eroded more than $60 billion in investors’ wealth. This led to the downfall of hedge fund Three Arrows Capital (3AC) as well, which had huge positions in LUNA. Consequently, the cascading effect was felt by Celsius Network, which lent a considerable amount to 3AC.
Notably, crypto exchange FTX has been one of the forerunners in the bid for Celsius’s assets. FTX was seen acquiring some of the distressed industry players this year, with the ongoing intense crypto meltdown this year.
U.S. Department of Justice Speaks Out
Back in June, Celsius Network froze withdrawals, citing huge liquidity issues. The U.S. Department of Justice (DoJ) has criticised Celsius’s action of resuming withdrawals for select customers and selling its stablecoin holdings.
The DoJ said that Celsius’s finances have minimum transparency, and this move associated with withdrawals shouldn’t be validated until a proper independent examiner has been assigned to Celsius. In addition to the DoJ, three more regulatory agencies have objected to Celsius selling its stablecoin holdings.
They have gone against it since they believe there’s a risk of Celsius using this capital to resume operations, violating U.S. laws. Last week, a U.S. Trustee for the DOJ, William Harrington, objected to Celsius opening its withdrawals in a filing. Harrington stated: “The Motions are premature and should be denied until after the Examiner Report is filed. First, the Withdrawal Motion seeks to impulsively distribute funds to one group of creditors in advance of a fulsome understanding of the Debtors’ cryptocurrency holdings.”
Suspicious Activity By The Founder
As per the latest report, Celsius Network founder Alex Mashinsky withdrew a whopping $10 million from the platform just ahead of the cryptocurrency lender freezing its customer accounts, supposedly to pay taxes. This pops up the question of whether the Celsius founder was aware that the crypto lender’s clients would have their funds locked on the platform in advance.
Was this writing helpful?