Celsius Bankruptcy Investigated by Independent Examiner
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The US Trustee’s office is seeking the appointment of an independent examiner to investigate crypto lender Celsius’ bankruptcy proceedings.
According to a court filing on Wednesday, the Office of the United States Trustee is attempting to address “a lack of transparency” surrounding the lender’s bankruptcy case.
“The addition of social media, in this case, has amplified [Celsius’] transparency issues because there is a lot of information on the internet, but it is not vetted or explained,” the filing reads. “The result has been confusion and anxiety. An examiner can fix this.”
The agency, part of the Department of Justice, is responsible for overseeing the administration of bankruptcy cases and private trustees in the US.
A Twitter account belonging to the Celsius Networks Official Committee of Unsecured Creditors voiced its concerns Thursday, claiming the appointment of an examiner would “run up millions in costs” for the lender.
“Let @CelsiusUcc do its job for account holders,” the account tweeted, tagging the Department of Justice’s Twitter handle in the process.
Celsius did not immediately return a request for comment.
The committee, formed in late July and representing Celsius users, consists of five individuals and two entities. It submitted its first official mission statement earlier this month, pledging to put the interests of Celsius’ account holders and unsecured creditors first.
Trust issues and transparency
There is no real understanding among customers, interested parties and the public relating to the value or type of crypto held by the lender, the office argues. An independent examiner is “necessary” to investigate and report clearly on Celsius’ operations as well as its lending transactions, it said.
“The divergent interests of the various estates, the extreme financial irregularities that have taken place and the extensive mistrust of [Celsius’] customers, all make the appointment of an independent and disinterested examiner in the best interests of creditors, equity security holders, and the bankruptcy estates,” staff at the Trustee’s office wrote in their filing.
The appointment — mandatory for cases exceeding $5 million dollars under US law — would restore public confidence in the integrity of the bankruptcy system by addressing the “inherent distrust” creditors and associate parties have, the court document shows.
“Numerous questions” in the New Jersey-based lender’s case also remain unanswered, the office said, including Celsius’ failure to “adequately collateralize” their loans as well as allegations relating to the offering of unregistered securities.
Celsius filed for chapter 11 bankruptcy protection in mid-July in a bid to “stabilize” its business following a halt to withdrawals in the month prior where it cited “extreme market conditions” as its reason following a steep decline in cryptocurrency prices, partly fueled by the collapse of Terra.
The lender had resisted calls from its previous lawyers at Akin Gump Strauss Hauer & Feld LLP to file for bankruptcy before conceding on advice from its new counsel, Kirkland & Ellis LLP.
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