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Home News Latest News

Interim Reports on Celsius Network Shows Insufficient Operations Control

22 November 2022
in Latest News, News
Reading Time: 3 mins read
107 1
Interim Reports on Celsius Network Shows Insufficient Operations Control

image source: headtopics.com

The interim report for Celsius Network has been released by the independent examiner in the company’s bankruptcy case. The report demonstrates that the Celsius network had insufficient accounting for customer funds.

Celsius network is one of the largest cryptocurrency lenders. It declared bankruptcy in the middle of the year after halting user withdrawals for a month. The company claimed the withdrawals were suspended due to extreme market conditions.

The liquidity issue arose as a result of two products offered by Celsius: a custody program and an earn product program. 

The custody program allowed users to keep tokens, transfer, swap, and use them as loan collateral without receiving any rewards. 

According to Shoba Pillay’s interim report, the custody program was launched with inadequate accounting and technical infrastructure. As a result, the custody wallets were depleted. Celsius was forced to fund it from its other assets.

The company halted withdrawals on June 12th, 2022, due to the custody program being underfunded. It dropped by 24% in a matter of weeks.

According to Phillip’s report,

“… no effort was made to segregate or separately identify assets associated with the withheld accounts, which were commingled in the main wallets.” 

Other inefficiencies were discovered within the organization. Alex Mashinsky, former CEO of Celsius, and Daniel Leon, former Chief Strategy Officer, did not track the company’s balance sheet until a regulator requested it. 

The collapse of the Terra/Luna ecosystem was also a factor. The de-peg of Terra’s UST caused the “$stETH” to be unstable due to its 1:1 ratio. The token lost its original value. Celsius had substantial funds in $stETH, but after the fall, it was unable to convert them into liquid assets. These events culminated in the company declaring bankruptcy in July 2022. 

According to Celsius’s Twitter post, a deadline for customers to file claims has been set. Customers who have agreed to the company’s claim scheduling, on the other hand, are not required to take any further action. 

The company’s next hearing is scheduled for December 5th to discuss Custody and Withheld accounts, among other topics.

 

If you would like to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, and Instagram.

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