The US Trustee Office filed a motion yesterday (18) to appoint an external independent investigative auditor for crypto lending platform Celsius, which has filed for bankruptcy protection.
Seeking a parallel to the well-known investigations into Enron and Lehman Brothers’ linked debt bankruptcies.
The U.S. Trustee’s Office, which has oversight over Celsius in all bankruptcies, filed a petition with the bankruptcy court on Monday stating that there are “numerous questions” about Celsius’s operating and financial status and how management led the company into bankruptcy.
Unlike the court-appointed Bankruptcy Trustee, the US Trustee is a Justice Department official.
Its authority includes overseeing most bankruptcy cases.
Under Title 11, U.S.C. 307, the Federal Trustee “may, under any circumstances or in any case or proceeding other than filing a plan of reorganization in a Chapter 11 bankruptcy case, ask questions and participate in hearings.” The Federal Trustee has considerable confidence in Celsius’s current financial status and cause of bankruptcy,
An independent investigator appointed by the trustee with the judge’s permission will be involved in understanding Celsius’s financial background to address “significant transparency issues” in the case, according to a motion filed with the court at the trustee’s office.
The Federal Trustee’s Office states that customers, stakeholders, and the public have no real knowledge of the type, actual value, or location of the crypto asset held by the Debtor (Celsius).
The case requires an independent auditor to investigate and report in a clear and understandable manner on the debtor’s business model, operations, investments, lending flows and the nature of customer accounts.
In the filing, the federal trustee challenged Alex Mashinsky, the chief executive of Celsius, for failing to identify who would finance third-party loans Celsius would receive, what collateral would be used, and what form of assets would be lent.
The Office of the Federal Trustee of the United States also sent outside independent investigative auditors to investigate the Lehman incident and the bankruptcy of Elon, which caused the financial tsunami.
At that time, the audit report on the Anlong affair concluded that “the senior management of Anlong should be fully responsible for the financial failure of the company”;
In the case of Lehman, it was concluded that “Lehman Brothers used accounting techniques to conceal bad investments that led to its bankruptcy”.
The level of independent scrutiny of Celsius is unusual for a company bankruptcy.
Celsius Creditor indicates additional expenses incurred However, a portion of the investigation expenses of the Federal Trustee shall be borne by the debtor (the insolvent company).
A committee of Celsius’s unsecured creditors took to Twitter to voice opposition to an independent inquiry, saying an external audit would cost millions of dollars during the period of bankruptcy when Celsius was supposed to reduce expenses.