The recent proposal by Celsius Network to involve Coinbase as part of its bankruptcy and reorganization plan has been met with opposition from the United States Securities and Exchange Commission (SEC). The SEC has raised concerns about the nature of the agreement between Celsius and Coinbase, citing potential legal disputes. This article examines the objections raised by the SEC and the implications of Coinbase’s involvement in the bankruptcy proceedings.
In response to Celsius Network’s proposal, the SEC filed an objection, stating that further scrutiny of the agreement between Celsius and Coinbase is necessary. The SEC’s concerns stem from its ongoing lawsuit with Coinbase, where the SEC has accused Coinbase of operating as an unregistered securities exchange. The objection filing highlights the potential risks associated with Coinbase’s involvement in the bankruptcy plan, given the existing legal dispute.
Additionally, the SEC pointed out that Celsius has clarified that Coinbase would not offer brokerage services, which contradicts the terms stated in the Coinbase Agreements. The SEC argues that an undisclosed agreement between Celsius and Coinbase should be presented to the court for review. The SEC also insists on the preparation of a new agreement that fully discloses the specifics of the arrangement between Celsius and Coinbase.
Celsius Network, which filed for bankruptcy in July 2022, has been working on a restructuring plan to repay its creditors. However, the involvement of Coinbase in the bankruptcy proceedings has presented new legal challenges. The objections raised by the SEC could further delay the repayment process and disrupt Celsius Network’s attempts to regain stability.
Furthermore, the SEC’s concerns about Coinbase’s role as a distribution agent bring into question the overall legitimacy of Celsius Network’s operations. The SEC’s allegations against Celsius and its former CEO, Alex Mashinsky, for violating securities registration and anti-fraud laws have raised doubts about the company’s financial practices. Celsius is accused of raising funds through fraudulent and unregistered sales of crypto asset securities, as well as making false statements to investors.
In response to the SEC’s objection, Coinbase’s chief legal officer, Paul Grewal, expressed surprise at the SEC’s opposition. Grewal questioned the SEC’s objection to a trusted US public company like Coinbase taking on the role of distributing crypto assets back to Celsius Network’s customers. Coinbase emphasized its commitment to fulfilling its role in the bankruptcy plan and expressed eagerness to address the SEC’s concerns in court.
However, Coinbase’s ongoing legal battle with the SEC raises questions about the stability of its operations. As an exchange, broker, and clearing agency, Coinbase’s regulatory compliance is of utmost importance. The outcome of the lawsuit between Coinbase and the SEC could significantly impact Coinbase’s ability to engage in similar agreements in the future.
The SEC’s objection to Coinbase’s involvement in Celsius Network’s bankruptcy and reorganization plan highlights the inherent risks and legal complexities of the crypto industry. The ongoing lawsuit between Coinbase and the SEC has created uncertainty around Coinbase’s role as a distribution agent in the bankruptcy proceedings. Celsius Network’s attempts to expedite repayments and regain stability are further hindered by the objections raised by the SEC. The outcome of this legal battle and the subsequent decisions made by the court will shape the future of crypto-related bankruptcy cases and the involvement of major players like Coinbase.