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Following a motion in August, U.S. Bankruptcy Judge Martin Glenn signed a request to appoint an examiner to investigate Celsius’s case surrounding the unit’s business.
In an announcement Wednesday from the U.S. Bankruptcy Court in the Southern District of New York, the independent examiner’s investigation will look at Celsius’s digital assets, tax payment procedures and the current state of the mining business with transparency requirements.
The examiner will also look into why there was a change in account offering in April, which resulted in some customers being transferred from the Earn Program to Custody Services, while others were transferred to “Withhold Accounts.” with the client not knowing who holds which account and why.
This is important because Celsius has asked the court to return assets to “custody clients”, not “earn-and-borrow clients”.
A motion to appoint an ombudsman was originally made from an Aug. 18 filing from the U.S. Commission, citing transparency issues surrounding Celsius’s business.
However, BnkToTheFuture CEO Simon Dixon said the scope of the investigation had been reduced since the initial petition was filed so Celsius would not run out of money.
He also noted that Celsius Network CEO Alex Mashinsky will need to provide information about withdrawing funds from the platform before the freeze.
CELSIUS HEARING LIVE; @CelsiusUcc legal council going over the examiner motion & reducing the scope so that @CelsiusNetwork doesn't run out of money. They said @Mashinsky to provide information on his withdrawals from the platform before the freeze.
— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) September 14, 2022
The latest Order also states that the scope of the investigation can be expanded if deemed necessary, but will require consultation with celsius and the official committee of creditors.
Celsius will be required to produce all documents that the examiner “deems relevant to carry out the Investigation, although Celsius will have grounds to deny a request, which will then be decided by the court.
Once the inspector’s identity has been approved, they will have seven business days to come up with a work plan and budget. The court will then have seven days to approve these, after which the examiner will have 60 days to complete their investigation.
Celsius filed for Chapter 11 bankruptcy and froze withdrawals in July. Since then, some depositors have been notified that their funds will be returned, but most users still cannot access their assets and there is no guarantee that they will receive them.
It seemed that the Assessor would be very busy when they were appointed, Dixon also tweeted that there were already forty parties available for interviews to take on this task.
CELSIUS HEARING LIVE; @CelsiusUcc legal council opposed to Trustee takeover as they think it may lead to liquidation which is undesirable. Examiner preferred. US Trustee has 40 parties ready to interview for examiners next week.
— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) September 14, 2022
