State officials from Texas and Vermont have filed a motion to stop troubled cryptocurrency lender Celsius from selling its stablecoin holdings.
Separate motions filed by both regulators on September 29 say that there is a chance the company could use the money to start up again in a way that breaks state laws.
The filings come after Celsius's lawyers asked the US Bankruptcy Court for the Southern District of New York on September 15 for permission to sell its stablecoin holdings, which are said to be worth about $23 million. On Oct. 6, there will be a hearing to decide whether or not to accept the motion.
But the Texas State Securities Board (SBB), the Texas Department of Banking, and the Vermont Department of Financial Regulation don't like the move. On Sept. 29, they filed objections.
In a joint filing, the two Texan regulators said that "more than 40 states" are looking into what Celsius did before it went bankrupt to see if it sold unregistered securities.
Texas regulators also said they were worried that if Celsius sold off all of its holdings, the company could start offering things in the state that don't follow the rules again, since it is still not registered with the Texas SBB. At the same time, in its own objection, the Vermont regulator also brought up similar concerns.
The fact that the company hasn't said what it will do with the money after it sells the stablecoins is a big worry for regulators.
"It is not at all clear what the debtors intend to do with the proceeds of any such sales, whether the relief requested extends to Stablecoin-denominated assets like retail loans to consumers, and the degree to which the Court will supervise the debtors' use of sale proceeds," the Vermont regulator's filing says, while the Texan filing says:
"Texas is very worried about the Debtors' request for an order that gives them unclearly wide power to sell and/or trade the assets."
So, the state regulators want Celsius's motion to be denied. The Texan regulators say it would "only serve to confuse the examination and make the already murky waters of the Debtors' cryptocurrency assets even murkier."
But the Texan regulators also said that if the motion was approved, the debtors should only be able to sell stablecoin and keep the money from that sale for the benefit of the creditors of the bankruptcy estate.
So far, the Celsius bankruptcy case has been very hard to understand because the company's balance sheet is not clear. This month, the US Bankruptcy Court for the Southern District of New York agreed to Celsius's request to appoint an independent examiner to look into different parts of its business.