An independent examiner will look into various aspects of Celsius Network’s digital asset holdings, a US Bankruptcy Court ruled. It indicates that the failed crypto lending platform will face more stringent scrutiny of its financial conduct.
US Bankruptcy Judge Martin Glenn approved a request to this effect on Wednesday, media reports said. However, the examiner has not been selected yet.
Probe by Independent Examiner
The court order to appoint an independent examiner comes in the wake of the Justice Department’s repeated call for greater transparency during the insolvency hearings.
In this case, the examiner will probe how Celsius stores its crypto assets and if different types of accounts are mixed at some stage.
A committee of unsecured creditors, represented by law firm White & Case, is conducting a wide-ranging investigation of the company and its officials, including CEO Alex Mashinsky. It’s receiving information about his withdrawals from Celsius, the coverage said, attributing the information to Greg Pesce of the law firm White & Case.
Given this investigation, the role of the independent examiner was pared down to avoid duplication after a discussion between US Trustee and Lawyers for Celsius creditors, Pesce added.
Celsius May Be Insolvent Since 2019
Recently, regulators from Vermont found out that Celsius has been insolvent since 2019 and asked for a closer look at potential financial misconduct by its leadership team. Documents revealed that the firm failed to comply with laws regulating securities and misled investors on the safety of funds and promises made to the investors.
The Vermont regulators also revealed that the CFO of Celsius, Chris Ferraro, admitted to the court that the network’s financial troubles began with losses incurred in 2020 and 2021. This conflicted with their claim that the platform faced liquidity problems due to the 2022 market crash.
Withdrawal Plea for $50 Million
Early this month, Celsius Network brought a motion in the Bankruptcy Court seeking permission for a small group of customers to withdraw their holdings from the Custody Program and Withhold Accounts, two different types of storage wallets. Celsius asked for the release of $50 million out of $225 million held in these types of accounts.
On June 13, Celsius halted withdrawals, swaps, and transfers between accounts, citing extreme market conditions. Two days later, it hired restructuring lawyers to help it overcome the financial challenges.
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Source: https://cryptopotato.com/court-rules-celsius-networks-holdings-to-be-probed-by-independent-examiner-report/