The Justice Department’s bankruptcy watchdog asked a judge Thursday to appoint an independent examiner in crypto firm Celsius Network LLC’s chapter 11 case, saying in a court filing that a neutral party needs to investigate allegations of gross mismanagement and incompetence.
U.S. Trustee William Harrington, part of the Justice Department unit overseeing bankruptcy court, said an examiner needs to look into the role Celsius’s management may have played in the platform’s illiquidity. Celsius froze customers’ crypto assets on its platform about a month before the firm filed for bankruptcy.
An examiner could also determine if legal claims should be brought against company management, Harrington said. Such an examination is also needed to explain Celsius’s business model to its customers because the cryptocurrency market is so new, opaque and loosely regulated.
Harrington added that an examiner should also determine the value and location of any digital assets the crypto firm holds. The lack of transparency has resulted in “widespread confusion among the debtors’ customers and parties in interest,” government lawyers said in the filing.
Examiners often are given broad powers in bankruptcy cases to investigate wrongdoing and balance the interests of competing parties in chapter 11 processes.