This isn't the only objection that Celsius is facing. Also this week, the company attempted to seek permission to sell some of its Bitcoin — and this proposal is also being challenged.
Celsius Network is facing objections over its plans to pay $409,000 in severance to 19 former employees.
The embattled crypto lender is currently in the middle of bankruptcy proceedings as it navigates a $1.2 billion black hole in its finances — with hundreds of thousands of users unable to access their funds.
According to the Justice Department, it is "troubling" that a number of ex-Celsius employees are receiving payments that exceed the cap of $15,150 as stipulated under U.S. guidelines.
Trustee William Harrington claims one person is set to receive $20,769 in severance — despite the fact they were only in the position for six weeks.
In court filings, he went on to argue that Celsius Network has failed to prove that such payments are necessary — especially when it comes to the company's continued operation.
Plans to Sell Bitcoin Challenged
This isn't the only objection that Celsius is facing. Also this week, the company attempted to seek permission to sell some of its Bitcoin reserves — and this proposal is also being challenged.
In a separate document, Harrington claimed the business has "failed to provide the necessary transparency into its business activities or its crypto holdings" — and show it would benefit claimants in the bankruptcy.
"To date, the debtors have failed to describe the extent of their crypto holdings — number of coins, estimated value of coins, or where the coins are held."
Harrington has argued that the amount of Bitcoin that could be sold is unclear, and such a motion can only be granted when there is "visibility" into Celsius Network's balance sheet and business practices.
As of July 25, the company says that it owns 80,850 mining rigs — and of those, 43,632 remain in operation, generating about 14.2 BTC per day.
The trustee went on to ask why Bitcoin needed to be sold in the first place considering that the company claims to have $170 million in cash.
"It is unclear why the debtors allege that they have been 'financially constrained.' The debtors must explain why they need these funds and why current liquid assets cannot be used instead."
With Celsius Network pushing for the freedom to offload Bitcoin, Harrington boiled down his objection into a simple question:
"If assets, including Bitcoin, are to be sold, what are the proceeds to be used for? The United States Trustee, even with its many requests, still lacks the visibility into debtors' business operations to determine where assets, cash, or cryptocurrency are held and how these different types of assets are used to pay the debtors' expenses or otherwise."
Rod Bolger had resigned on June 30, a couple of weeks after the company abruptly halted all withdrawals, swaps and transfers in a shock announcement.
News of the plans to give the ex-CFO such an astronomical paycheck during a time of financial turmoil would have undoubtedly gone down badly with the estimated 1.7 million people who have been unable to access any of their funds for almost two months.