Celsius asks court to sell stablecoins to fund new crypto custody business

Rick Steves

Interestingly, Celsius already owns a crypto custodian subsidiary, GK8, but it is attempting to sell the firm as part of its bankruptcy process.

Disgraced crypto lender Celsius Network has requested the bankruptcy court to allow it to resume operations business operations despite having frozen client accounts in June.

“The Debtors seek entry of an order […] permitting the Debtors, on a postpetition basis and consistent with past practice and in the ordinary course of business, to continue to sell and/or exchange their stablecoin for U.S. dollars and […] granting related relief.”

$23 million to fund new operations at Celsius

Celsius argued that the Bankruptcy Code is designed to strike a balance between allowing a business to continue its daily operations without excessive court or creditor oversight and protecting secured creditors and others from dissipation of the estate’s assets.

The firm believes the court will find the law will stand by its side as it looks to sell its stablecoin portfolio in order to recover the flexibility to run its business and respond quickly to changes in the business environment. According to the filing, Celsius currently owns eleven different forms of stablecoin totaling approximately $23 million.

Celsius was founded in 2017 and grew to become one of the largest and most sophisticated cryptocurrency based finance platforms in the world catering to institutional, corporate, and retail clients across more than 100 countries. The firm allows users to transfer their crypto assets and earn rewards on crypto assets and take loans using those transferred crypto assets as collateral. At the time of bankruptcy, the firm had more than 1.7 million registered users and approximately 300,000 active users with account balances greater than $100.

Celsius wants to convert into crypto custodian

As part of Chapter 11, Celsius ceased its active retail lending programs, Earn program, and Custody services, among other activities, and agreed it would not liquidate or exchange any cryptocurrency absent further order of the court.

If the court agrees to the sale of stablecoins to fund the resumption of operations at Celsius, the industry will surely be following how easily will the firm (re)conquer the trust of users

The details of Celsius’ hardships are public and, in such an unregulated activity, it would be surprising to see Celsius recover any momentum, but the firm is also reinventing itself to become a crypto custodian.

Interestingly, Celsius already owns a crypto custodian subsidiary, GK8, but it is attempting to sell the firm as part of its bankruptcy process. Celsius acquired GK8 for $115 million in 2021 and has sought initial bids for its digital asset custody subsidiary GK8 Ltd. by August 15, according to court papers, which noted that potential bidders include “strategic parties, other companies in the cryptocurrency ecosystem, scaled fintech companies, and traditional financial institutions”.

Celsius Network has also been under fire for claiming $750 million in insurance, $500 million of which through GK8 and its insurance policy with AON. An attorney defending investors has called those claims a sham because GK8 was never integrated into Celsius operations, according to Celsius CEO Alex Mashinsky.

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