Celsius is looking to merge two of its entities based in the United Kingdom and the United States. The crypto lender, which is bankrupt, is facing accusations of insufficient record-keeping of its affiliate companies, making it almost impossible to reconstruct intercompany claims.
The creditors have deemed the differentiation between Celsius’ operations in the UK and the US to be a “sham.”
- In mid-2021, Celsius’ Celsius Network Limited arm claimed to have migrated the customer-facing business on the Celsius platform from CNL to Limited Liability Company (LLC), a newly created shell firm incorporated in Delaware.
- CNL was accused of transferring billions of dollars of liabilities to LLC, while the former retained almost all of the assets associated with those obligations.
- Despite warnings from UK regulatory authority Financial Conduct Authority (FCA) to cease all retail operations in the country, the assets were reportedly used for “money-making investments.”
- The court filing on May 1st stated that the “migration resulted in intercompany chaos.” It also revealed that no formal documentation of the CNL-LLC intercompany relationship was completed for several months, and even when it was, it remained ambiguous what transactions the agreements effectuated.
- The filing argued that the two entities should be treated as one as such action is an “appropriate remedy.”
- Celsius routinely failed to record intercompany coin transfers, and the books and records provided very little clarity. It is estimated that thousands of entries are missing from the records.
- The debtors have been working to reconcile these records for months but are yet to come to a conclusion. However, the document revealed that full accounting on a transaction-by-transaction basis may never be feasible.
- Earlier this year, Celsius allowed eligible customers to withdraw funds for the first time since the lender halted its services in June 2022 by reopening Distributable Assets in certain Custody Accounts.
