Independent Examiner Ordered to Produce Interim Report About Crypto Lender Celsius

The report’s findings may affect the court’s decisions about custodial accounts and preference claims.

AccessTimeIconOct 7, 2022 at 7:36 p.m. UTC
Updated Oct 10, 2022 at 3:22 p.m. UTC
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The independent examiner in crypto lender Celsius Network’s bankruptcy will need to produce an interim report detailing Celsius’ financial management and handling of customer accounts, U.S. bankruptcy Judge Martin Glenn ruled Friday during a court hearing.

The interim report, expected to be filed in mid-November, will form part of the process to determine who owns the crypto assets held in Custody and Withhold accounts, and under what circumstances Custody and Withhold account holders may access their holdings, according to the ruling.

Celsius had been one of the most prominent crypto lenders, and its bankruptcy left many thousands of customers waiting for funds that are currently trapped on the platform. The U.S. Trustee’s office, a Department of Justice entity, appointed Shoba Pillay, a Chicago-based partner at law firm Jenner & Block, as an independent examiner to probe into Celsius’ operation, financial management and handling of crypto accounts that led it to file for bankruptcy earlier this summer.

Pillay’s interim report will mark the “first time the court will hear from an independent, neutral third party on a number of critical issues in the case,” Dov Kleiner, a partner at law firm Kleinberg Kaplan, told CoinDesk in an email. “She is expected to weigh in on, among other things, where currencies were held, how they were stored and moved around and to whom they currently belong.”

The report may also affect decisions about potential preference claims and transaction clawbacks.

Judge Glenn expressed worries about Celsius management members withdrawing assets before Celsius’ bankruptcy. The examiner is expected to look into insider transactions, too.

Alex Mashinsky, former CEO of the crypto lender, and Daniel Leon, former chief strategy officer, who both resigned recently, withdrew a combined $17 million in crypto from their accounts between May and mid-June, when Celsius halted all user withdrawals, CoinDesk reported this week. Celsius' current chief technology officer, Nuke Goldstein, also withdrew some $13 million, but then deposited the majority of it to another account.

According to U.S. law, insiders’ withdrawals may be subject to clawback up to a year prior filing for bankruptcy.

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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.


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