Celsius Calls for Consolidating US and UK Entities Amidst Poor Record-Keeping Allegations

Celsius is seeking to consolidate two of its entities located in the United Kingdom and the United States. The bankrupt crypto lender faces charges of poor record-keeping of its affiliate companies, making it almost impossible to “fully reconstruct” intercompany claims.

The distinction between Celsius’ UK and US operations was deemed to be a “sham” by the creditors.

• In mid-2021, the company’s Celsius Network Limited arm purported to migrate 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 worth of liabilities to LLC, while the former retained nearly all of the assets associated with those obligations.
• The assets were claimed to have been used to deploy in “money-making investments,” despite warnings from UK regulatory authority Financial Conduct Authority (FCA) to cease all retail operations in the country.
• 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.
• It further argued that the two entities should be treated as one as such move is an “appropriate remedy.”
• The books and records offered very little clarity as Celsius routinely failed to record intercompany coin transfers. It is estimated that thousands of entries are missing from the records.
• The debtors now working to reconcile these records for months but is yet to reach a conclusion. However, full accounting on a transaction-by-transaction basis may never be possible, the document revealed.
• Earlier this year, Celsius announced the reopening of Distributable Assets in certain Custody Accounts, which allowed eligible customers to withdraw funds for the first time since the lender halted its services in June 2022.

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