Selective focus of bankruptcy form, wallet with dollar banknote, coins and documents on brown wooden table — Photo

Celsius creditors support appointment of trustee in bankruptcy case

Celsius Network is inching closer to having an independent examiner appointed to probe its collapse, with the company and its creditors expressing support for the move in recent court filings.

William Harrington, the United States Justice Department trustee overseeing the bankruptcy proceedings, filed a request to appoint an independent examiner to probe the lender’s collapse two weeks ago. The Vermont Department of Financial Regulation filed a motion in support of the appointment recently.

Now, the Official Committee of Unsecured Creditors and Celsius attorneys have filed two separate motions supporting the appointment.

In their motion, the unsecured creditors wrote, “The Committee supports greater transparency in these chapter 11 cases and, indeed, has successfully pushed the debtors to be more transparent on a variety of fronts. The Committee believes that the appointment of an examiner with an appropriate investigative scope can further this purpose.”

However, the creditors want the scope and budget for any examination narrowed to avoid excessive costs and delays in the process. Citing previous bankruptcy cases, the creditors noted that examiners could sometimes cost hundreds of millions of dollars and delay the proceedings by several months. They pointed to the Residential Capital bankruptcy case in which the examiner took home $89 million and took over eight months to complete the probe.

The filing also accused higher-ups at Celsius, including chief executive officer Alex Mashinsky, of transferring client funds into their accounts, an accusation they want the examiner to probe.

“This resolution, if approved by the court, will balance the need for transparency with the risks of significant costs/delay. If the court orders the appointment of an examiner, we will work with that individual to ensure transparency and accountability for account holders,” the creditors noted.

Celsius Network is also in support of the appointment of an examiner.

“The debtors are pleased to have been able to reach a resolution with the U.S. Trustee and the Committee that provides for the appointment of an examiner with a defined scope that will not duplicate the existing ongoing investigations,” the lender’s lawyers wrote in a September 8 filing.

Just like with the creditors’ committee, Celsius also wants the scope of the examiner’s probe narrowed to avoid duplication of investigations and cut down on time.

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