Chief U.S. Bankruptcy Judge Martin Glenn has appointed an independent examiner to oversee the Celsius bankruptcy case.
According to yesterday’s order from the United States Bankruptcy Court of the Southern District of New York, the examiner will look into Celsius’ crypto holdings, the utility obligations of its crypto mining business, recent changes to its account offerings, as well as its compliance with tax and bankruptcy proceedings.
Bringing in independent examiners can be a costly business, so it’s easy to see why some of Celsius’s borrowers have opposed the move.
The examiner used in the Enron fraud case, for example, in the early 2000s, R. Neal Batson, is reported to have run up $90 million in fees.
McCarter & English, a law firm representing some of Celsius’s borrowers, filed a motion requesting a Chapter 11 Trustee be appointed instead of an internal examiner from the US Trustee office, as the latter could “significantly delay the resolution of this case.”
The motion to appoint an independent examiner, which is generally only used in complex bankruptcy proceedings, was first made by the United States Trustee handling the crypto lender’s proceedings, who alleged there were “significant transparency issues” and “gross mismanagement” regarding the firm’s handling of the bankruptcy case.
Once the examiner has been approved, they will have seven days to propose a budget and plan of action. The court will have a week to approve this.
Following this, the examiner will then have 60 days to complete the investigation.
Celsius will need to “provide to the examiner all non-privileged documents and information” within their possession that the examiner “reasonably deems relevant” to the investigation.
What happened to Celsius?
The news comes after Celsius first initiated bankruptcy proceedings in July 2022, freezing withdrawals for customers, and revealing that it owed $5.5 billion to clients and creditors.
The firm’s financial issues began at roughly the same time as the stablecoin project Terra imploded, a crash in crypto more widely, and consumers withdrawing funds from Celsius’s platform en masse.
CEO Alex Mashinsky acknowledged that they “made what, in hindsight, proved to be certain poor asset deployment decisions.”
The majority of the firm’s clients are as of yet still unable to withdraw their funds.