Expert flags flaws in Celsius’s accounting and custody controls

Bankrupt Celsius platform could not establish adequate accounting and operational controls for handling client funds, according to independent expert Noda Pillay.

In an interim report to the court, the specialist noted that the critical deficiencies relate to the Celsius Custody product. The solution launched in April replaced for American users the Earn program. Regulators have raised concerns about the latter.

“No steps were taken to segregate or separately identify assets tied to accounts that were commingled in the main wallets,” the expert said.

According to Pillay, this allowed the company to fund the shortfall in the custodial wallets with other funds.

“As a result, clients now face uncertainty about which assets belonged to them at the time of filing for bankruptcy,” he said.

The expert also drew attention to the moment that likely compelled the crypto-lending platform on June 13 suspend withdrawals. According to him, on June 11 client wallets faced underfunding. By June 24, asset shortfall had risen by 24% to $50.5 million.

Pillay also noted other accounting shortcomings at Celsius. For example, founders Alex Mashinsky and Daniel Leon started tracking the platform’s balance only after regulators’ initial complaints in May 2021. They used Google Sheets for accounting, the expert noted.

The bankruptcy court has already установил a deadline of January 3, 2023, by which the company’s clients must file claims to seek reimbursement.

Celsius noted that if users consent to the court-established schedule, they do not need to provide proofs of claim or take any further action.

As a reminder, customers who agree with Celsius’ scheduling of their claims as filed in the Schedules of Assets and Liabilities do not need to submit a proof of claim and no further action is required of them at this time with respect to such claim. https://t.co/zymkBeyZm5

— Celsius (@CelsiusNetwork) November 20, 2022

The next bankruptcy hearing is scheduled for December 5. The platform intends to “continue discussions around Custody accounts and main wallets”.

Earlier in October, the court утвердил Celsius’s asset-sale plan. Auctions could wrap up by year-end.

The company filed a motion for additional time to develop measures for reorganizing the business.

Read ForkLog’s Bitcoin news on our Telegram — cryptocurrency news, prices and analysis.