Nikhilesh De
Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.
The U.S. Trustee's office has asked a federal court to allow it to appoint an independent examiner to review Celsius Network's financials as the crypto lender continues fighting to restructure and stave off bankruptcy.
The U.S. Trustee, a part of the Department of Justice, is tasked with overseeing and aiding in bankruptcy matters. According to a court filing submitted to the U.S. Bankruptcy Court in the Southern District of New York on Thursday, there are "numerous questions" about Celsius' operations and its financial health, as well as how its management allowed it to enter bankruptcy. An independent probe would answer questions about the company's financials and address "significant transparency issues" in the bankruptcy case.
Some of the most high-profile and controversial bankruptcies in history included the appointment of an examiner, including Enron and Lehman Brothers. In both cases, the examiner dove into the causes of their spectacular falls.
"There is no real understanding among customers, parties in interest, and the public as to the type or actual value of crypto held by the Debtors or where it is held. An independent examiner is necessary here to investigate and report in a clear and understandable way on the Debtors’ business model, their operations, their investments, their lending transactions, and the nature of the customer accounts to ensure public confidence in the integrity of the bankruptcy system and to neutralize the inherent distrust creditors and parties in interest have in the Debtors," the Office said.
The filing pointed to details such as the fact that Celsius took out a third-party loan but did not identify who the lender is, what the collateral was or what kind of loan was issued. Moreover, this was even after the lender revealed it could not return the collateral.
"No description of the types of claims the Debtors may have against this lender are made in the Mashinsky Declaration, nor is there an explanation for why legal recourse was not sought," the filing said. "There is also no description of any investigation by the Debtors into its legal recourse."
Celsius' customers also do not trust the company, and have said so in filings published to the court docket, the Trustee's office said.
Appointing an independent examiner "would be in the best interest" of both Celsius, its creditors and equity holders, the filing said.
"The Debtors’ professionals acknowledge many of these facts and circumstances and have provided information requested by the United States Trustee. Irrespective of such cooperation, however, the divergent interests of the various estates, the extreme financial irregularities that have taken place, and the extensive mistrust of the Debtors’ customers, all make the appointment of an independent and disinterested examiner in the best interests of creditors, equity security holders, and the bankruptcy estates," the filing said.
UPDATE (Aug. 18, 2022, 22:35 UTC): Adds additional detail.
