The U.S. Securities and Exchange Commission (SEC) has voiced its objection to Coinbase’s proposed role in bankrupt crypto firm Celsius’ reorganization plan. According to a filing made by the SEC, Celsius intends to have Coinbase act as a distribution agent to return funds to former users affected by its collapse. However, the SEC argues that Coinbase’s expected role goes beyond the typical duties of a distribution agent. The regulator also points out inconsistencies in Celsius’ statement that Coinbase will not provide brokerage services, despite indications in their agreement suggesting otherwise.
Furthermore, the SEC believes that there may be an additional agreement between the two companies that has yet to be disclosed. The regulator insists that if such an agreement exists, it should be provided to both the SEC and the court. The SEC also expressed concerns about certain trading services described in the agreement, which align with issues raised in its lawsuit against Coinbase on June 6.
Coinbase’s Chief Legal Officer, Paul Grewal, responded to the SEC’s objection, stating that his firm is proud to engage with Celsius in distributing crypto back to its customers. Grewal questioned the SEC’s opposition to the distribution plan and assured that Coinbase will address the matter within Celsius’ bankruptcy proceedings.
Celsius, which initially halted withdrawals in June 2022, filed for bankruptcy a month later in July. According to Forbes, the crypto lending firm owed $4.7 billion to creditors at the time. This amount excluded institutional partners but included retail users.
In addition to its objection to Coinbase’s proposed role, the SEC has also raised concerns about Celsius’ CEL token in a separate securities fraud case. The regulator alleges that Celsius and its former CEO, Alex Mashinksy, offered and sold the CEL token in unregistered and fraudulent security offerings. As part of its complaint in the bankruptcy case, the SEC has requested the court to determine whether CEL is a security and to limit the ruling’s effects to the dispute over Celsius’ distribution plan. It argues that a broader ruling could potentially hinder its separate securities case against Celsius.
The SEC’s objection to Coinbase’s involvement in Celsius’ bankruptcy plan raises further complications for the already troubled crypto firm. It remains to be seen how the court will rule on this matter and whether it will have implications for Celsius’ ongoing legal battles with the SEC.