Celsius Crypto Borrowers Call for Bankruptcy Trustee, Oppose US DOJ Move to Appoint Examiner

A group of Celsius Network borrowers wants a bankruptcy court to appoint an independent examiner to investigate the crypto-lender’s financials, but not one working for the U.S. Trustee office.

Celsius filed for bankruptcy protection earlier this summer. Its attorneys maintain that the company can recover with the aid of a still-being-built mining operation. The U.S. Trustee’s office, a division within the Department of Justice, petitioned the Bankruptcy Court for the Southern District of New York last month to let it appoint an independent examiner, saying the company is not being transparent about its financial situation.

Four Celsius borrowers – Zaryn Dentzel, Gregory Kieser, Joseph Eduardo and Michael Conlan – said in a Wednesday court filing that while an independent examiner should be appointed, this person should not come from the Trustee’s office.

“The borrowers are concerned that the wide scope of the examination proposed by the U.S. Trustee will significantly delay the resolution of this case. Given the current monthly cash burn in this case, this delay will cost the estate tens of millions of dollars,” the filing said.

The borrowers also said they would like the examiner’s focus to be on maximizing the funds recovered, rather than Celsius’ past behavior. To that end, the borrowers asked the court to appoint a Chapter 11 trustee.

“It is painfully apparent that the Debtors [Celsius, the associated entities and its leadership] do not believe in transparency,” the filing said.

The Trustee’s effort to appoint an examiner, however, received support from state regulators probing Celsius.

Vermont’s Department for Financial Regulation (DFR) boosted the Trustee’s claims Wednesday, announcing in a filing that Celsius’ liabilities may have exceeded its assets for as long as three years, excluding the company’s CEL token holdings – which DFR alleged Celsius manipulated to bolster its balance sheet.

The regulator went so far as to imply that Celsius operated like a Ponzi scheme, saying the company’s admission that it did not generate enough revenue to support its yield product “shows a high level of financial mismanagement and also suggests that, at least at some points in time, yields to existing investors were probably being paid with the assets of new investors.”

Read more: Celsius Resembled Ponzi Scheme at Times, Vermont Regulator Says