Judge Authorises the Application of Independent Examiner in the Bankruptcy Case of Crypto Lender Celsius

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Last Updated on September 15, 2022 by Bitfinsider

A federal judge has granted a request for the U.S. Trustee’s office to appoint an impartial examiner to look into the financial management of cryptocurrency lender Celsius Network, which resulted in the company filing for bankruptcy earlier this summer.

According to a decision made by U.S. bankruptcy judge Martin Glenn on Wednesday, the independent examiner would be required to look into a number of things, including Celsius‘ cryptocurrency holdings, the reasons why some customers’ accounts were switched from the Earn Program to the Custody Service while others were put into a “Withhold Account,” the processes used by Celsius to pay various taxes, and the current state of the utility obligations associated with its mining operation.

Celsius has outlined a plan for how a mining company that is still being created would be able to make enough money to stay in business.

Celsius and a few of its creditors reached an understanding last week that a private government examiner should look into the company as it progresses through the bankruptcy process. The U.S. Trustee’s office, a division of the Department of Justice charged with overseeing bankruptcies, submitted a request in August to appoint an impartial examiner to look into the business on the grounds that its management had not been forthcoming with the company’s actual financials.

The Official Committee of Unsecured Creditors and Celsius’ lawyers stated in separate filings that they had consented to the appointment as long as the examiner’s scope was constrained to reduce the expense and duration of the probe, notwithstanding the opposition of some of Celsius’ borrowers. The committee’s filing stated that the U.S. Trustee’s office concurred with these restrictions as well.

The judge ruled on Wednesday that an examiner will have seven business days after being approved to provide a work plan and a budget. The plan and budget must then be approved by the court within seven days, and the examiner has 60 days to submit their report after that.

Early this summer, Celsius filed for bankruptcy after restricting user withdrawals on its platform in June due to “extreme market conditions.” Following the crash of Terra and its LUNA token in May, which caused bitcoin to drop to a third of its previous all-time high value of almost $69,000, problems for the company started when alarmed retail investors rushed to withdraw their assets from Celsius’ platform, causing a bank run-like situation at the exchange.

Celsius disclosed that it owes its customers $4.7 billion in its bankruptcy papers. Since then, 58,000 custody account holders who collectively lost $150 million have banded together to demand answers from the company and seek the return of their stolen funds.

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