Following the approval of Celsius’ restructuring plan – which could put up to 67% of the assets previously held by the firm for its customers back into their hands – the team began looking for ways to distribute what was left of its holdings back to creditors.
Due to the complexities of the international banking system, Celsius elected to sign a temporary partnership with Coinbase, which has the advantage of being a public company with a reputation to uphold.
Coinbase Oversteps its Attributes, Says SEC
Unfortunately, the deal has raised some eyebrows at the SEC, which recently promised further enforcement actions against crypto companies it believes are non-compliant.
According to the regulator, the agreement between the two firms would put Coinbase in a role more akin to that of a broker than to that of a mere distributor.
Coinbase is already embroiled in a separate legal battle against the SEC, in which the exchange has been accused of acting as an unlicensed broker and clearinghouse.
“The Coinbase Agreements go far beyond the services of a distribution agent, contemplating brokerage services and master trading services that implicate many of the concerns raised in the SEC’s District Court action against Coinbase.”
Although the document submitted by the SEC does not have any legal bearing on the court case, it advises the court presiding over Celsius’ bankruptcy case to put the deal on hold and look for a different solution.
“The Debtors have confirmed that they do not intend for Coinbase to provide brokerage services to the Debtors, despite the language in the Coinbase Agreements to the contrary. However, this Court should not be asked to approve a deal where the material terms are missing or inconsistent.”
The document also mentions that a second separate agreement between the firms was signed. However, the SEC does not have a copy of the document and, therefore, refused to comment on it.
Coinbase Refutes Allegations
Coinbase’s CLO expressed disbelief at the SEC’s advice to the court, reiterating the dedication of the firm he represents to making Celsius users whole again.
Coinbase is proud to engage with Celsius to distribute crypto back to its customers. I wonder, why would the SEC object to a trusted US public company taking on this role? We look forward to addressing this with the bankruptcy court and undertaking our important role to make… https://t.co/5i1aJDiPXp
— paulgrewal.eth (@iampaulgrewal) September 25, 2023
Whether the SEC’s advice is heeded by the court is uncertain. However, it’s worth noting that the regulator has faced minor snubs in court regularly – such as the denial of access to Binance.US’s code.