SEC Challenges Celsius Decision to Repay Customers Through Coinbase

The U.S. SEC has raised concerns about a move that would see Coinbase help bankrupt crypto lender Celsius distribute funds to affected customers.

The United States Securities and Exchange Commission (SEC) has opposed a new restructuring proposal submitted by bankrupt cryptocurrency lending platform Celsius. At the core of the matter is an agreement that Celsius has in place with crypto exchange Coinbase. 

Termed the “Coinbase Agreements,” the deal would see Coinbase act as a “Distribution Agent,” assisting Celsius in distributing cryptocurrencies recovered from its ongoing liquidation process. However, the SEC has stepped in to oppose the deal, citing its ongoing case with Coinbase.

Recall that on June 6, the SEC filed a lawsuit against Coinbase. The regulator alleged that the crypto exchange operated as an unlicensed securities exchange and that its staking products constituted securities under US laws. 

The SEC, in its latest filing, also claims that the Celsius restructuring plan, if approved, would allow Coinbase to offer the same brokerage services for which it is in a lawsuit with the regulator.

The SEC argues that although Celsius debtors claim that they “do not intend for Coinbase to provide brokerage services [to the debtors],” the wording in the Coinbase Agreements is contrary. The agency claims the agreement could allow Coinbase extend beyond being just a distributor.

Additionally, the SEC alleged an additional agreement between Coinbase and Celsius that the firm has not made available to the SEC staff. The SEC wants the undisclosed agreement or any new agreement that clarifies Coinbase’s role in the Celsius restructuring plan to be presented to the regulatory agency and the bankruptcy court.

Coinbase Responds to Address Newly Raised Issues

Following the SEC’s latest filing, Coinbase’s chief legal officer, Paul Grewal, took to X (formerly Twitter) to clarify the company’s next line of action. 

Coinbase looks “forward to addressing [the SEC arguments] with the bankruptcy court and undertaking [its] important role to make Celsius customers whole,” Paul Grewal said in a tweet later retweeted by Coinbase CEO Brian Armstrong.

Meanwhile, Coinbase in August filed a motion to dismiss the initial SEC lawsuit against the company. Coinbase’s primary argument is that the exchange does not offer investment contracts, as alleged by the US securities regulator.