Bankruptcy lender Celsius wants to sell its $23M Stablecoin holdings

In the latest chapter of Celsius’ ongoing liquidity crisis, which only became public when the lender frozen customer withdrawals in June, the bankrupt crypto lender has asked the US Bankruptcy Court for the Southern District of New York for permission to sell its stablecoin inventory.

Straight submissions as of yesterday indicates that Celsius has requested authorization to sell its stablecoins to pay for operations. The company previously released a coin report on Wednesday revealing that it has over $2 billion in liabilities from various cryptocurrencies; its stablecoin holdings amount to approximately $23 million, held in 11 different stablecoins.

Should the proposal be approved by Judge Martin Glenn, America’s top bankruptcy judge, Celsius would have the liquidity to continue its day-to-day operations “without court or creditor oversight.”

Paying back its creditors (aka customers) is a separate ongoing legal process, but Celsius’ filing argues that it is in everyone’s best interest for Celsius to monetize its stablecoin holdings to continue operations without having to secure additional funding.

Unlike Bitcoin, Ethereumand other leading cryptocurrencies, stablecoins have a fixed value, as they are tied to fiat currencies, thus forming a relatively reliable source of crypto liquidity.

The Celsius liquidity crisis

Celsius’ ongoing Chapter 11 bankruptcy proceedings are a high-profile case of what commentators have called a “crypto winter” or “liquidity crisis.”

Since the collapse of the Terra ecosystem back in May, which came when Terra’s dollar-pegged UST stablecoin lost the pin, several high-profile crypto companies have filed for bankruptcy. First was Celsius in June, then in July, Voyager and Three Arrows Capital followed.

On September 1, Celsius said in a court filing that it sought to return some of the customer’s funds. The company offered to release nearly $50 million in crypto belonging to customers who were part of the “custodian” program — accounts that stored crypto but did not generate returns.

Should Celsius’ proposal be approved, the returned funds would only cover a fraction of the lender’s obligations: custodial accounts amount to $210.02 million in crypto, according to the filing. But for customers who invested crypto in Celsius’ popular “earn” program account for $4.3 billion in assets, there was no word on when they will get their money back.

Exactly one week later, a US bankruptcy court archiving revealed that state officials in Vermont have requested broader powers to investigate Celsius, claiming the insolvent cryptocurrency exchange had artificially inflated the price of the CEL token at the expense of retail investors over the past three years.

“By increasing its net position in CEL by hundreds of millions of dollars, Celsius inflated and supported the market price of CEL, thereby artificially inflating the company’s CEL holdings on its balance sheet and financial statements,” Vermont Assistant Attorney General Ethan McLaughlin said.

Judge Martin Glenn arrived on Wednesday appointed an independent auditor to oversee the Celsius bankruptcy case. The examiner will look into Celsius’ crypto holdings, the benefit obligations of the crypto mining business, recent changes to the account offering, as well as tax and bankruptcy compliance.