Texas regulators have asked a US bankruptcy court to deny Celsius’ request to monetize its mined bitcoin, saying it’s concerned about how the proceeds would be used.
In a formal objection filed on Friday, shared by Law360, the Texas State Securities Board (SSB) said Celsius’ past admittedly involves “problematic asset deployment decisions, using the mined bitcoin to repay intercompany loans, potential mismanagement, and a continued failure to comply with state regulatory requirements.”
Celsius has failed to outline how it plans to benefit its creditors with the sale proceeds, board members added.
“The SSB does not object, generally, to [Celsius’] sale of its mined bitcoin for the benefit of the estate; however, the SSB is extremely concerned by [Celsius’] request for a comfort order that allows ambiguously broad authority to use these assets.
Celsius is among the highest-profile crypto lenders burned by the recent market downturn, driven by TerraUSD’s (UST) crash and the collapse of crypto hedge fund firm Three Arrows Capital.
The company filed for bankruptcy on July 13 and listed a $1.2 billion shortfall on its balance sheet. The firm, which owes over $4.8 billion to its users alone, is trying to find liquidity to repay creditors.
Its native token, CEL, now trades for more than double its two-year lows recorded after it locked accounts in early June, but still 65% below its price at the start of the year.
Celsius considers its bitcoin mining business key to its restructuring efforts, it said in a recent filing, believing it could generate revenue for the future and for loan repayments.
The lender projected to generate 10,118 BTC ($243 million) in 2022 and 15,000 BTC ($361 million) in 2023 and claimed to own 80,850 bitcoin rigs with about 43,600 in operation.
“The debtors [Celsius] should not be granted permission carte blanche to transfer and dispose of assets of the bankruptcy estate without oversight, and because of the substantial risk to creditors of the estate, should not be allowed to further hypothecate or invest mined bitcoin in an unstable and highly fluctuating market,” the board wrote.