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Celsius. Continuation of the Bankruptcy Case.

The court has set a deadline for filing lawsuits against Celsius, January 3 2023, for all who suffered from the bankruptcy of the company. An independent expert also presented her first report.

The court case related to the bankruptcy of Celsius has been going on for several months. As we wrote earlier, the company is actively filing petitions to the court, more and more people are filing lawsuits against Celsius, and the judge has appointed an independent expert to conduct an investigation. Of course, all this has its consequences, let's sort it out in order.

Firstly, the United States Bankruptcy Court for the Southern District of New York in an official document outlined the deadline when the victims of the bankruptcy of Celsius can file their claims by.

“The United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) has entered an order (the “Bar Date Order”) establishing 5:00 p.m. prevailing Eastern Time on January 3, 2023 (the “General Claims Bar Date”), as the last date for each person or entity2 (including individuals, partnerships, corporations, joint ventures, and trusts) to submit a Proof of Claim against any of the Debtors listed on page 2 of this notice (collectively, the “Debtors”).”-the document reads.

The list of "debtors" on which users can file a claim, according to the document, contains 8 names.

List of "debtors”.
List of "debtors”. Source: U.S. Bankruptcy Court

On Twitter, Celsius notified users of a new ruling regarding the deadline for filing claims, and also prepared a video that should help to understand the process of filing a claim.

Secondly, an independent expert, Shoba Pillay, published the first interim report on November 19. The expert analysed the work of Celsius in detail, thanks to this we’ve received the exact reason for stopping the withdrawal of funds on June 12.

According to the document, the shutdown on June 12 was due to the fact that the previously over-secured deposit wallets became underfunded, which is clearly visible on the graph. In this regard, the exchange could no longer provide clients with a withdrawal of funds.

“Beginning in May 2022, Celsius faced liquidity challenges. In its May 2022 Board Minutes, Celsius reported that its “capital sits near zero.” At the same time, between May 9, 2022 and May 24, 2022, customer withdrawals caused Celsius to experience a net loss of over $1.4 billion in assets. By June 12, 2022, Celsius’s liquidity had dropped to the point where it could no longer honor customer withdrawal requests and Celsius announced that “due to extreme market conditions” it was “pausing all withdrawals.” – the document reads .
The number of Celsius digital assets in custodial wallets.
The number of Celsius digital assets in custodial wallets. Source: U.S. Bankruptcy Court

The expert also identified two very important problems related to the Celsius Custody program, which, by order of the regulatory authorities of New Jersey, appeared in April of this year:

  1. The rush to launch the program contributed to poor technical and accounting work, which led to confusion during transactions between Main wallets, Earn deposits and Custody wallets.
  2. Confusion in the movement of assets between wallets led to users not understanding which assets and in what amounts these wallets belonged to. This in turn has complicated the process of filing lawsuits.
“This investigation revealed that Celsius reacted to the regulatory scrutiny by launching its Custody program without sufficient accounting and operational controls or technical infrastructure. The Custody accounts did not regularly reconcile with assets held in the Custody wallets; shortfalls in the Custody wallets were funded by the Main wallets, where Earn deposits and other crypto assets were held; and no effort was made to segregate or separately identify any assets associated with the Withhold accounts, which were commingled in the Main wallets. As a result, customers now face uncertainty regarding which assets, if any, belonged to them as of the bankruptcy filing.” - it is written in the report.

Let's hope that users will be able to file claims in time and return their assets. The next meeting is scheduled for December 5 and perhaps we will see a new report from the expert. In the meantime, we will continue our observations!