The US trustee handling Celsius’ bankruptcy proceedings has called for an independent investigator to be brought in to “unravel” the troubled network’s financial affairs and business operations.
In a motion filed Aug. 18 with the United States Bankruptcy Court by William K. Harrington, the U.S. trustee has requested that an examiner look into allegations of “incompetence or gross mismanagement” as well as “significant transparency issues” surrounding Celsius’ operations in connection with the bankruptcy case.
Examiners are appointed by bankruptcy courts to examine the details of complex cases brought before them. They are able to present information to the courts from an independent point of view and have been appointed in other high profile bankruptcy cases such as Lehman Brothers during the subprime mortgage crisis.
According to the proposal, the appointment of a case manager will be beneficial for the parties involved given the complexity of the case, as they can provide information beyond the court’s expertise.
“An investigation by an independent examiner—who will present his findings in an understandable manner—is essential to provide the Court, the United States Trustee, creditors, and other interested parties with transparency and clarity regarding the business structure, practices, and liquidity of the debtors.”
Harrington also mentioned that an investigator would be able to determine whether legal claims should be brought against management, as there are allegations of “credible allegations of incompetence or gross mismanagement.”
The US trustee has also suggested that there are “significant transparency issues” surrounding Celsius’ business operations.
“The debtors have not provided sufficient information about their liquidity position, their business model, the flow of traditional cash funds or the value of their crypto assets,” Harrington said, adding that the information could then be used to evaluate any proposed restructuring or sale.
Related: Celsius CEO led personal crypto trader months before bankruptcy: Report
Harrington also added that a sensor may be able to sift through the wealth of information on the internet that muddy the facts surrounding Celsius, prompting customers to form their own conclusions.
Not all parties involved support the request for an examiner, and the Celsius Official Committee for Unsecured Creditors points out the costs of doing so.
@CelsiusUcc is concerned about the effort to put an external “examiner” into the @CelsiusNetwork bankruptcy case. It will run into millions in costs when CEL should cut costs. Let @CelsiusUcc do their job for account holders @JusticeDept
— Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) 18 August 2022
However, experts who are not directly involved in the case – such as bankruptcy partner at McCarter and English David Adler – seem to agree that an examiner is justified.
— David Adler (@DavidJAdler1991) 18 August 2022