In a recent development, the Securities and Exchange Commission (SEC) has expressed concerns regarding Coinbase involvement in the restructuring plan of Celsius Network. This crypto-lending company filed for bankruptcy over a year ago. 

The federal agency responsible for regulating US securities markets, the SEC, has filed limited objections and reservations of rights in response to Celsius, citing “inconsistencies” and potential violations of federal securities laws by the US-based exchange.

The SEC’s objections are rooted in a litigation filed earlier this year against Coinbase, accusing the platform of operating an unregistered securities exchange. 

Conversely, the regulatory agency alleges that Celsius Network and its former CEO Alexander Mashinsky engaged in unregistered and fraudulent sales of crypto asset securities, including their own CEL token. 

While the SEC’s case against Celsius Network has been stayed pending Mr. Mashinsky’s criminal case, the objections raised in the bankruptcy proceedings shed light on the ongoing legal battle.

According to finance expert Walter Bloomberg, Celsius Network’s proposed restructuring plan involves the distribution of digital assets to customers through Coinbase. 

However, the SEC’s concerns focus on the broader scope of Coinbase’s involvement, which goes beyond acting solely as a distribution agent. The agreements in the plan between Celsius and the US-based exchange encompass brokerage and master trading services, which overlap with the activities that prompted the SEC’s litigation against Coinbase.

One of the main issues highlighted by the SEC is the absence of a “clear agreement” between Celsius Network and Coinbase and the “discrepancy” between the stated intentions of the parties involved. 

Although Celsius Network asserts that Coinbase will not provide brokerage services, the SEC emphasizes the importance of transparent and consistent terms in approving the deal.

However, “CryptoMiami,” a DeFi investor and crypto enthusiast who goes by the pseudonym, views the SEC’s objection regarding Coinbase’s role in the Celsius case as “limited in scope.” According to CryptoMiami, the objection primarily pertains to adding a brokerage and master services agreement, while Coinbase was initially intended to be a distribution agent. 

In the Celsius Disclosure Statement, Coinbase is mentioned explicitly as the distribution agent for international creditors, with PayPal serving as the agent for US creditors. 

CryptoMiami believes that this objection made by the SEC does not signal broader implications beyond the specifics of the Celsius case.

As the bankruptcy court prepares to review Celsius Network’s restructuring plan, the objections raised by the SEC underscore ongoing concerns surrounding regulatory compliance and the intersection of cryptocurrencies and securities laws. 

Nevertheless, the SEC reserves the right to challenge crypto asset transactions and keeps open the possibility of further objections to the plan’s confirmation or related motions.

Featured image from Shutterstock, chart from TradingView.com 

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