Judge to appoint examiner in Celsius case

Quick Take

  • A court-approved third-party will investigate Celsius’s current finances. 
  • Examiner appointment is rare in Chapter 11 bankruptcy. 

A U.S. bankruptcy judge in the Southern District of New York approved an order to appoint a neutral third party to examine the finances of embattled crypto lender Celsius. 

Lawyers from the Justice Department, securities regulators, and representatives of creditors and consumers seeking to recoup their losses pushed for the examiner, a step to which Celsius itself did not object. Smaller claimants had asked for a trustee instead, to begin more actively paying off the company's debts. The use of an examiner in Chapter 11 bankruptcies is rare. 

The major consumer and creditor group, known as the Committee for Unsecured Creditors (UCC), earlier raised concerns about the cost associated with an examiner, but recently reached an agreement with the Justice Department's bankruptcy office, the U.S. Trustee Program, to narrow the scope of the examiner's investigation, causing them to change their position. The judge presiding over the case, Martin Glenn, left open the possibility of further changing the scope of the third-party examination of Celsius's finances. 

The U.S. Trustee first moved to appoint an examiner last month, saying the case required a neutral investigator due to "extreme financial irregularities" and "the extensive mistrust of the Debtors' customers." The office will interview candidates for the examiner role next week.


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Meanwhile, the UCC is also conducting its own investigation into Celsius. During today's hearing, it said it's made "significant progress" with Celsius and the firm has agreed in writing to cooperate with its investigation, already producing 16,000 documents. CEO Alex Mashinsky has retained his own counsel, and has also begun to produce information for the UCC, including on 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 counsel Gregory Pesce. State securities regulators filed their support for an examiner last week, submitting some of their preliminary findings. Those findings included allegations that Celsius had continuously misled customers on its financial health in the lead up to its collapse.

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

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Aislinn Keely is a reporter on The Block's policy team holding down the legal beat. She covers court decisions, bankruptcies, regulatory actions and other key moments in the legal sphere, putting them in context for the wider crypto industry. Before The Block, she lent her voice to the NPR affiliate WFUV and helmed Fordham University's student newspaper. Send tips or thoughts on all things policy and legal to [email protected] or follow her on Twitter for updates @AislinnKeely.