Celsius creditors move to block the company from selling mined Bitcoin
by James · August 11, 2022
Celsius Network’s unsecured creditors have pressed the company over “potential misconduct by Celsius and its insiders.”
During a Chapter 11 bankruptcy hearing today, the committee moved to block Celsius’ attempts to sell some of the mined cryptocurrency.
Celsius Mining is Bitcoin mining subsidiary of Celsius Network, the struggling crypto lender that filed for bankruptcy on July 13. A day later, the mining operation joined the parent company in the bankruptcy filing.
It was a sudden development. In May, Celsius Mining filed a draft registration with the US Securities and Exchange Commission to be made public.
This week, lawyers representing the committee wrote in a court case that they first need more insight into how sales of Celsius mines Bitcoin will be carried out and how the proceeds from the sale will be used.
The company has previously said it will use its mining operations to pay back creditors and customers. In fact, at the start of the trial in July, Celsius received approval from the judge to spend $5 million to start mining operations. But it has since drawn criticism from the US Department of Justice and now the creditors’ committee.
The committee also said it is launching a “wide-ranging investigation” and expects to invoke Bankruptcy Rule 2004.
If approved by the judge, this rule would allow for the kind of extensive discovery process that might require interested parties to testify or produce documents in a process similar to a deposition in a civil lawsuit.
So far, Celsius Network CEO Alex Mashinsky has already reviewed a declaration on more than 1,000 pages documenting every version of the company’s terms of service, for all products, going all the way back to February 2018, right after Mashisky became CEO.
This week has been particularly contentious for Mashisky.
On Monday, the committee of unsecured creditors filed a statement calling out the “empty and false promises” he made days before the company froze customer funds.
“Celsius’ assurances turned out to be empty and false promises. On June 12, 2022 – less than a week after vowing to ‘curse the torpedoes’ – Celsius initiated a ‘pause’ and halted all account holder withdrawals due to ‘extreme market conditions,’” the lawyers say. wrote in the statement, referring to the blog post the crypto lender published just five days before it froze customer funds. “Celsius, which had previously championed its openness, then became largely silent.”
In a press release announcing the submission, following its efforts to repay $1 billion in outstanding loansMashinsky said he believed the filing would be a “decisive momentwhere acting with determination and confidence served society and strengthened the future of the company.”
