DOJ Opposes Reopening Of Celsius Withdrawals

Crypto Markets In Turmoil After Celsius Suspends Withdrawals
Celsius Network

The US Department of Justice (DOJ) has stated that it will not allow Celsius to reopen withdrawals for its customers until an official examination has been completed. 

DOJ demands more patience from Celsius creditors

Since June, customers are waiting to finally withdraw their funds from the troubled CeFi lending service Celsius. While the firm submitted plans to sell their stablecoin asserts and reopen withdrawals during its ongoing restructuring to the bankruptcy court, several state regulators have filed motions to prevent the sale of stablecoins.

Now, the DOJ has chimed in and filed another objection to both the stablecoin sell-off and the reopening of withdrawals. William Harrington, the DOJ representative who drafted the objection, argues that Celsius should wait until there is an independent examiner’s report on their business operations:

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.

Earlier this year, a report submitted by Celsius to the courts revealed that the company was in even more dire straits than initially thought, with a total gap of 2.85 billion on their balance sheets. 

Celsius CEO allegedly withdrew $10M ahead of bankruptcy

The founder and former CEO of Celsius Network, Alex Mashinsky, has reportedly withdrawn 10 million USD of his personal funds deposited on the lending platform. According to the Financial Times, this happened in mid- to late June, less than four weeks before customer withdrawals were halted. 

A spokesperson for Celsius told the Financial Times that these funds were mostly used for tax payments and that the Mashinsky family still has more than 44 million USD locked on the platform. However, federal US laws permits the court to force Mashinsky to pay the funds back, as they were withdrawn less than 90 days to Celsius’ bankruptcy filing. 

Mashinsky stepped down from his CEO position in the last week, stating that it has become an “increasing distraction”. 

The “vultures” prepare for a bidding war

Meanwhile, BnkToTheFuture founder Simon Dixon has commented on Twitter what the future might possibly hold for Celsius and its numerous creditors. His first prediction was that Celsius will file a motion to allow the firm to compensate creditors in CEL tokens, which will be struck down by the regulating bodies.

While it is reasonable to assume that regulators will not let such a motion pass, his prediction of what happens then is more controversial:

This will drive the vultures into a bidding process where the vultures will try & buy the assets we paid for without our consent & FTX & TradFi will give us pennies on the dollar. It will be a lot worse for creditors than [Voyager Digital] due to size of hole.

FTX CEO Sam Bankman-Fried, who recently won the bid to purchase Voyager Digital’s assets for 1.3 billion USD, responded to Dixon, stating that the Voyager bids were valued at a fair market price and that he intends to proceed in the same fashion for a potential bid on Celsius.