Texas Department of Banking

A key concern is that the firm hasn’t explicitly outlined what it will do with the stablecoin sale proceeds.

State regulators from Texas and Vermont have filed a motion objecting to embattled crypto lender Celsius’ plans to sell off its stablecoin holdings.

Separate motions from both regulators filed on Sept. 29 argue that there’s a risk the firm could use the capital to resume operating in violation of state laws.

The filings come after a Sept. 15 notice from Celsius' legal team asking the United States Bankruptcy Court for the Southern District of New York for permission to sell its stablecoin holdings, reportedly worth around $23 million. A hearing to accept or decline the motion will occur on Oct. 6.

However, the move has not gone down well with the Texas State Securities Board (SBB), the Texas Department of Banking, and the Vermont Department of Financial Regulation, who filed objections on Sept. 29.

The two Texan regulators in a joint filing outlined that “more than 40 states” are currently investigating Celsius’ pre-bankruptcy activities in relation to potential unregistered securities offerings.

Texas regulators also highlighted a concern that if Celsius sells off its holdings, the firm may resume non-compliant offerings in the state, given that it is still not registered with the Texas SBB. At the same time, the Vermont regulator also highlighted similar concerns in its own objection. 

A key concern across the regulators is that the firm hasn’t explicitly outlined what it will do with the funds after it sells the stablecoins.

“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 such as retail loans to consumers, and the degree to which Debtors’ use of sale proceeds will be supervised by the Court,” the Vermont regulator's filing reads, while the Texan filing notes that:

“Texas is extremely concerned by the Debtors’ request for an order that allows ambiguously broad authority to sell and/or exchange the assets.”

As such, the state regulators are requesting that Celsius’ motion be denied, with the Texan regulators asserting that it would “only act to confound the examination and further muddy the already opaque waters that are the Debtors’ cryptocurrency assets.”

Related: FTX reportedly considers bailing out Celsius via asset bid

However, the Texan regulators also said that should the motion in question be approved, the “relief granted to the Debtors should be limited to selling stablecoin and holding the proceeds of such sale solely for the benefit of creditors of the bankruptcy estate.”

The Celsius bankruptcy case has been highly complicated thus far, given the cloudy nature of the firm’s balance sheet. Earlier this month, the United States Bankruptcy Court of the Southern District of New York granted a motion for Celsius to appoint an independent examiner to investigate aspects of its business.