McCarter & English, a law firm representing four Celsius borrowers, has filed a motion asking for the appointment of a chapter 11 Trustee instead of an internal examiner from the U.S. Trustee’s office.
The U.S. Trustee’s office had on Aug. 18 petitioned the court overseeing the bankruptcy process to appoint an independent examiner.
In a counter filing, the borrowers argued that in order to maintain transparency and unbiased assessment of Celsius’ financials, a chapter 11 Trustee should be appointed.
A chapter 11 Trustee is appointed by the court to work on behalf of the creditors in investigating the debtor’s financial documents and managing its business until the bankruptcy process is completed.
The borrowers argued that appointing a Chapter 11 Trustee would be in the best interest of all creditors and other stakeholders. According to the borrowers, an examiner would usually take much time before issuing a report which would incur more financial burden for the struggling crypto lender.
In support of a Chapter 11 Trustee, the borrowers said it would help speed up the resolution process which will go a long way to save Celsius tens of millions of dollars.
Celsius’ transparency questioned
To push their motion, the borrowers outlined instances where Celsius showed a lack of transparency and mistrust which warrants their motion for an independent examiner.
The borrowers cited a case when Celsius failed to disclose the identity of the “private lending platform” which defaulted on its $439 million loan.
The crypto lender was also accused of not explaining why it failed to respond to Tether’s margin call which led to a loss of approximately $97 million.
Celsius CEO Alex Mashinsky was also called out for misleading the public about the company’s liquidity shortly before it filed for bankruptcy.
Liquidity resolution in view
Recent updates on the Celsius case indicate that the company is making progress in resolving its crisis and refunding customers.
In a Sept. 1 filing, the crypto lender asked the court to permit eligible custody customers to withdraw funds up to $210 million.
Celsius also said it expects to receive an additional $70 million from a loan repayment to fund its business operation beyond November 2022.