- The court-appointed examiner in Celsius’ bankruptcy case has published her final report.
- The report accuses the bankrupt crypto lender of operating like a Ponzi scheme.
- The independent examiner revealed that customer funds were used to pay for other customers’ withdrawals.
The independent examiner appointed by the U.S Bankruptcy Court for the Southern District of New York in the bankruptcy case of the Celsius Network released her final report earlier today. The 689-page report detailed the questionable business practices of Celsius and its founder and former CEO Alex Mashinsky.
Shobha Pillay, the independent examiner who is a partner at Jenner & Block, was appointed by bankruptcy Judge Martin Glenn in September 2022. Pillay was to investigate allegations made by Celsius’ customers regarding the company’s irresponsible handling of their deposits, in addition to operating like a Ponzi scheme.
As per the court’s directions, the examiner investigated the claims pertaining to the Ponzi angle and found that in some instances Celsius “did directly use new customer deposits to fund customer withdrawal requests.” This statement is backed by the fact that Celsius processed certain withdrawals amid a severe liquidity crunch.
In some cases, Celsius used customer funds as collateral to borrow the necessary crypto required to fill the hole in its balance sheet and fund the mounting withdrawal requests. The report also revealed that Celsius made several questionable trades in an attempt to prop up the price of its native token CEL.
On one particular occasion, when the bankrupt crypto lender made a push to prop up the price of CEL, Celsius’s former Vice President of Treasury asked where the cash was coming from to fund the CEL purchases. To this, Celsius’ Coin Deployment Specialist replied, “users like always.”
“In every key respect—from how Celsius described its contract with its customers to the risks it took with their crypto assets—how Celsius ran its business differed significantly from what Celsius told its customers,” Pillay stated in her final report.
According to Pillay, Celsius was not fully cooperative during the examiner’s investigation. Celsius provided changing explanations about the availability of data that was critical to the investigation. She experienced a lack of full cooperation which led to a delay in the filing of this final report.
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