Judge to appoint reviewer in Celsius case

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A U.S. bankruptcy judge in the Southern District of New York has approved an order appointing a neutral third party to review the finances of troubled crypto lender Celsius.

Lawyers from the Department of Justice, securities regulators and representatives of creditors and consumers seeking to recover their losses pushed the examiner, a step Celsius himself did not object to. The small claimants had asked for a trustee instead, to start repaying the company’s debts more actively. The use of an examiner in Chapter 11 bankruptcies is rare.

The main consumer and creditor group, known as the Unsecured Creditors Committee (UCC), had previously raised concerns about the cost associated with an examiner, but recently reached an agreement with the Department of Justice’s Bankruptcy Office. Justice, the US Trustee Program, to narrow the scope of the examiner’s investigation, causing him to change his position. The judge presiding over the case, Martin Glenn, left open the possibility of further changing the scope of the third-party review of Celsius’s finances.

The US trustee first offered to appoint an examiner last month, saying the case required a neutral investigator because of “extreme financial irregularities” and “high levels of customer mistrust of debtors”. The office will interview candidates for the post of examiner next week.

Meanwhile, the UCC is also conducting its own investigation into Celsius. At today’s hearing he said he had made “significant progress” with Celsius and the company agreed in writing to cooperate with his investigation, producing 16,000 documents already. CEO Alex Mashinsky withheld his own advice and also began producing information for UCC, including his own withdrawals from the platform.

Tomorrow, the UCC will join a call with state regulatory agencies to share the status of their respective investigations, according to attorney Gregory Pesce. State securities regulators filed their support for a reviewer last week, submitting some of their preliminary findings. These findings included allegations that Celsius continually misled customers about its financial health before its collapse.

Celsius entered Chapter 11 bankruptcy proceedings in July this year and has since withstood scrutiny from various parties to the proceedings due to a perceived lack of clarity and allegations of fraud.

© 2022 The Block Crypto, Inc. All rights reserved. This article is provided for informational purposes only. It is not offered or intended for use as legal, tax, investment, financial or other advice.

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