A federal judge in the United States Bankruptcy Court for the Southern District of New York has authorized the Office of the US Trustee to appoint an independent reviewer to investigate the affairs of bankrupt New Jersey-based cryptocurrency lending firm Celsius Network.
It is on July 13, 2022 that the Celsius Network said that it had filed for Chapter 11 protection in order to restructure and stabilize its business.
The United States Trustee is a component of the Department of Justice responsible for overseeing the administration of bankruptcy cases.
Independent reviewer to review Celsius
Judge Martin Glenn ruled that the examiner would look into a number of areas, including (i) the nature of Celsius’ crypto holdings, (ii) why from April 2022, account offerings moved from the Earn program to the custodial service for some customers while for others it was a holdback account, (iii) Celsius’ procedures for paying various taxes and the extent of its compliance with non- bankruptcy, and (iv) the current status of its mining company’s public service obligations.
Founded in 2017, Celsius quickly grew into a major crypto company operating in four countries including the US, UK, Serbia and Israel.
In September 2021, Texas, New Jersey, Kentucky and Alabama initiated an investigation against Celsius for allegedly offering unregistered titles to its users in those states.
The exchange said none of its offerings were securities and that it remained committed to complying with state regulations in its operations.
In May 2022, Celsius was reported witnessed a 50% drop in the value of its assets, such as reported by the Financial Times.
In the same month, a pair of major digital tokens, viz. Luna and TerraUSD, collapsed. The Wall Street Journal reported that the findings of the analysis company Nansen highlighted the role of Celsius in the crisis; the company, however, denied the charge.
In June 2022, Celsius suspended withdrawals and transfers of assets on its platform, citing “extreme” market conditions, and filed for bankruptcy the following month.
The exchange said it has $167 million in cash to support its current operations as it restructures its business. It also asked authorities to pay its employees while customer claims are settled through the Chapter 11 process.
Celsius revealed that it owed its users $4.7 billion. Since then, 58,000 deposit account holders who together lost $150 million have banded together to demand answers from the struggling exchange and get their funds back.
According to the court order, the examiner will have to propose a work plan and a budget for his investigation within seven days. The court must approve this work plan and budget within seven days; the rights of all interested parties remain reserved. Then the examiner must file their report within 60 days.