Less than a month after William K. Harrington, United States Trustee for Region 2, sought the appointment of an examiner in the Celsius bankruptcy case, the Court has granted the motion.

On September 14, 2022, Judge Martin Glenn of the New York Southern Bankruptcy Court, signed an order directing the United States Trustee to appoint an examiner in the jointly administered chapter 11 cases pursuant to section 1104(c) of the Bankruptcy Code.

The scope of the Examiner’s investigation will consist of:

• An examination of the Debtors’ cryptocurrency holdings, including a determination as to where the Debtors’ cryptocurrency holdings were stored prepetition and are stored postpetition and whether different types of accounts are commingled.
• An examination as to why there was a change in account offerings beginning in April 2022 from the Earn Program to the Custody Service for some customers while others were placed in a “Withhold Account.”
• An examination of the Debtors’ procedures for paying sales taxes, use taxes, and value added taxes and the extent of the Debtors’ compliance with any non-bankruptcy laws with respect thereto.
• An examination of the current status of the utility obligations of the Debtors’ mining business.
• Perform the duties of an examiner set forth in §§ 1106(a)(3) and 1106(a)(4) of the Bankruptcy Code.

Celsius will have to provide to the Examiner all non-privileged documents and information within its possession that the Examiner reasonably deems relevant to perform the Investigation.

On a regular basis, customers of Celsius file grievance letters on the Court docket. These allegations include (i) that the Debtors ran a Ponzi scheme where the yield was coming from new investors and not from the charged interests on loans; (ii) that employees withdrew their own funds in advance of the account freezing, thereby causing additional market volatility; and (iii) that current management made regular public announcements to customers assuring them of the safety of their crypto assets through regular AMAs (Ask Me Anything) when management was aware of the danger surrounding investments.