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US authorities raise ‘numerous questions’ to Celsius leadership

The US Board of Trustees has released a list of questions about Celsius Network’s operations, the platform’s financial condition, and the circumstances surrounding its bankruptcy filing. This is due to court documents.

A federal agency under the US Department of Justice has requested that an independent expert be appointed to investigate Celsius’ bankruptcy. A similar procedure has been used in high-profile cases such as Enron and Lehman Brothers.

The initiative “could address key transparency issues – closing the gap between creditors and debtors by building confidence in the information provided for successful restructuring.”

“There is no real understanding among customers, stakeholders and the public as to the type or true value of cryptocurrencies held by borrowers or where they are stored. There is a need for an independent expert to research and report on the business model of the borrowers, their activities, investments, lending activities and the nature of client accounts in a clear and understandable manner”, says document.

The agency noted the details of the transaction – the case of lending to Celsius by a third party, without specifying who the lender was, what type of collateral or what type of loan was given. The transaction took place after the partner informed that the deposit is non-refundable.

“In the declaration [CEO Алекса] Mashinsky, no explanation of the types of claims that debtors can submit, no explanation as to why no appeals were made to the court.” – specified in the application.

Officials believe that, despite providing the information requested by the ministry, the appointment of an independent expert is the best step in the interests of creditors and securities holders.

Celsius’s committee of creditors said they had no objections, but said the initiative would result in additional “million dollar” costs.

The third party investigation will also include examining allegations of “fraud, dishonesty, incompetence, misconduct and negligence”.

Earlier, the creditors committee described Mashinsky’s collateral as “empty and false” a few days before the clients’ assets were frozen.

The committee also stated that the court intends to enforce the 2004 Rule as part of a “large investigation”. It includes statements from interested parties and submission of documents in a process similar to what happens in civil litigation.

On July 13, Celsius filed for Chapter 11 bankruptcy in New York court. The company said its liabilities exceed its balance sheet assets by approximately $1.2 billion.

On July 19, the company submitted a business restructuring plan. It includes the direction of a subsidiary mining company’s profit to compensate for losses of users and payments to creditors. Before that, Celsius Mining SEC application for public offering.

On August 17, the court allowed Celsius to sell the mined bitcoins to cover expenses.

According to the latest estimate, the “hole” in Celsius Network’s balance sheet was $2.85 billion. From August to October, the platform will lose $137 million due to investments in its mining business and restructuring expenses as it has completely exhausted its cash reserves.

The Financial Times recently reported that Mashinsky interfered with the implementation of a trading strategy for a crypto lending platform that cost “millions of dollars”.

Read ForkLog bitcoin news in our Telegram – cryptocurrency news, courses and analysis.

Source: Fork Log

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