Celsius creditors also filed a statement claiming that CEO Alex Mashinsky made false promises to customers and that his assurances were empty.
Celsius Network’s creditors unsecured have been pressing the company to address “potential misconduct by Celsius Network and its insiders.”
Today’s hearing in Chapter 11 bankruptcy proceedings saw the committee move to stop Celsius from trying to sell some of its mined cryptocurrency.
Celsius Mining, the Bitcoin mine affiliate of Celsius Network (the embattled crypto lender) filed for bankruptcy on July 13. The mining operation was joined by its parent company in bankruptcy filings the day after.
It was a sudden development. Celsius Mining filed a draft registration in May with the U.S Securities and Exchange Commission for public access.
The attorneys representing the committee stated in a court filing this week that they need to know more about how Celsius’s mined Bitcoin is sold and how the proceeds will be used.
According to the company, it has stated that it will use its mining operations to repay creditors and clients. Celsius was granted approval by the judge at the beginning of July to spend $5 million in order to restart its mining operations. However, this has been criticized by the U.S. Department of Justice as well as the creditor committee.
Additionally, the committee stated that it will launch a “broad-ranging inquiry” and plans to invoke Bankruptcy Rule 2004.
If the judge approves the rule, it would allow for broad discovery that could include the production of documents or testifying by interested parties in a similar process to a civil deposition.
Alex Mashinsky, CEO of Celsius Network, has filed a declaration more than 1000 pages. This document documents every version of the company’s terms and conditions for all its products back to February 2018, just after Mashisky was appointed CEO.
Mashisky was particularly upset this week.
Monday’s statement by the committee of unsecured creditors was filed. It criticized the “empty and false statements” that he made just days before the company frozen customer assets.
“Celsius’ promises turned out to have been empty and false. “Celsius announced a pause on June 12, 2022, less than a week after promising that it would ‘damn torpedoes’. This was in response to an announcement made by the attorneys . The statement refers to the blog post the crypto lender published five days prior to freezing customer assets. “Celsius which had once championed transparency, then mostly went silent.”
Mashinsky stated in a press release that the filing was made after the company tried to repay $1billion in outstanding loans. He believed that the filing would be “defining moment where action with resolve and confidence served both the community and the company’s future.”