The recent development in the bankruptcy and reorganization plan of the crypto firm Celsius Network has faced opposition from the United States Securities and Exchange Commission (SEC) regarding the involvement of Coinbase. Celsius had proposed using Coinbase to distribute digital assets to its international customers, seeking approval from the court. However, the SEC objects to this proposal, claiming that the Coinbase Agreements require further scrutiny.

The SEC’s objection raises concerns about the extent of services provided by Coinbase, which go beyond the role of a distribution agent. The agreement involves brokerage services and master trading services, which the SEC believes implicate many of the concerns raised in their ongoing lawsuit against Coinbase. The SEC has accused Coinbase of acting as an unregistered securities exchange, thus violating federal securities law. As a result, the proposed activities between Celsius and Coinbase could potentially lead to additional legal disputes for both parties.

Another point raised in the SEC’s objection is the existence of an undisclosed agreement between Celsius and Coinbase. The SEC insists that this agreement should be presented to the court for proper examination. While the SEC retains the right to raise objections if Coinbase’s role is not adequately addressed, they have also requested the preparation of a new agreement that fully discloses the particulars of the arrangement between Celsius and Coinbase.

Paul Grewal, Coinbase’s chief legal officer, expressed his confusion regarding the SEC’s objection. He emphasized that Coinbase is proud to engage with Celsius in distributing crypto back to its customers. Grewal questioned why the SEC would object to a trusted US public company taking on this role. He further added that Coinbase looks forward to addressing this matter with the bankruptcy court and fulfilling its important role in making Celsius customers whole.

In July 2022, Celsius Network, a cryptocurrency exchange, filed for bankruptcy. The following year, in July 2023, the SEC accused Celsius and its former CEO, Alex Mashinsky, of violating securities registration and anti-fraud laws. According to the SEC, Celsius had raised billions of dollars through fraudulent and unregistered sales of crypto asset securities. They also alleged that Celsius made false statements to investors about the company’s financial health and manipulated the price of its native token, CEL, dating back to 2020.

Since March, Celsius has been working on a restructuring plan, which has undergone four revisions during that period. The company aims to expedite repayments to its creditors, but legal challenges continue to persist. In August, the bankruptcy court granted Celsius’s request to send digital ballots to creditors in October for voting on the restructuring plan. The next hearing in the bankruptcy case is scheduled for October 5th.

The SEC’s objection to Celsius Network’s proposal to involve Coinbase in its bankruptcy and reorganization plan highlights the uncertainties and challenges in the crypto industry. As regulators strive to ensure compliance with securities laws, any collaboration or agreement involving companies under scrutiny, such as Coinbase, will face increased scrutiny. This case serves as a reminder of the importance of transparency, proper disclosure, and adherence to regulations in the rapidly evolving world of cryptocurrencies. Celsius and Coinbase will need to address the SEC’s concerns and work towards a resolution that safeguards the interests of their customers and complies with applicable laws. The outcome of this dispute will undoubtedly have implications for the broader crypto industry and its relationship with regulatory bodies like the SEC.


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