Examiner Says Bankrupt Crypto Firm Celsius Failed Control Set Ups To Track Customer Funds

  • The Independent examiner appointed for Celsius Network LLC's chapter 11 case said that the company failed to set up proper accounting and operational controls.
  • The examiner found that Celsius hadn't developed a separate infrastructure for the custody program, which it started offering in April.
  • Celsius had to transfer funds from the rest of its holdings into the custody accounts to address frequent shortfalls. 
  • Wall Street Journal reported that Celsius continued to mix deposits in so-called withhold accounts, the second type of account it created in response to regulatory pressure, with the rest of its funds.
  • As a result, Celsius customers now face uncertainty over which assets belong to them as of the bankruptcy filing date.
  • In 2021, state and federal regulators began investigating whether Celsius's earn accounts were securities that shouldn't be sold to unaccredited investors. 
  • In September 2021, regulators in New Jersey ordered Celsius to stop offering new yield-earning accounts to individual investors.
  • In response, Celsius created the custody and withhold programs, requiring U.S. customers to make any new deposits into those new types of accounts that earned no interest.
  • At the time of Celsius's bankruptcy filing, $180 million of coins were held in the custody accounts. Withhold accounts have just over $13 million in deposits.
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