Shoba Pillay states “insufficient” accounting and operational controls as reason behind Celsius’ mishandling of customer funds | The Financial Express

Shoba Pillay states “insufficient” accounting and operational controls as reason behind Celsius’ mishandling of customer funds

According to Cointelegraph, examiner Pillay mentioned about her observations in her court-backed investigation of the bankrupt cryptocurrency lending platform

Shoba Pillay states “insufficient” accounting and operational controls as reason behind Celsius’ mishandling of customer funds
It is believed that Terra ecosystem’s collapse was one of the important factors behind Celsius’ financial troubles in May, 2022

The independent examiner of cryptocurrency lender Celsius’ bankruptcy case has made the allegations that the company didn’t develop “sufficient” accounting and operational controls in its handling of customer funds, as reported by Cointelegraph.

According to Cointelegraph, through a November 19, 2022, interim report, examiner Shoba Pillay mentioned about her observations in her court-backed investigation of the bankrupt cryptocurrency lending platform. Through Pillay’s report, it was found that Celsius’s “Custody” program was unveiled “without sufficient accounting and operational controls or technical infrastructure,” which permitted shortfalls in custody wallets to be funded from its other holdings.

On the basis of information by Cointelegraph, when it was unveiled on April 15, 2022, Celsius’ Custody program allowed users to transfer, swap and use coins as loan collateral. The initiative was introduced post the firm being ordered by the New Jersey security regulators to create a product that was distinguished from Celsius “Earn” product, which gets rewards. 

“As a result, customers now face uncertainty regarding which assets, if any, belonged to them as of the bankruptcy filing,” Pillay highlighted.

Moreover, Cointelegraph noted that the interim report focused on what caused to the halting of withdrawals for the lending platform on June 12, 2022. Pillay highlighted that the breaking point took place on June 11, 2022, when customers’ Custody wallets became underfunded. By June 24, 2022, it fell by a further 24% to $50.5 million in underfunding. Through a November 20, 2022, Twitter post, Celsius stated that customers who comply with Celsius’ scheduling of their claims aren’t required to submit proof of claim. 

It is believed that Terra ecosystem’s collapse was one of the important factors behind Celsius’ financial troubles in May, 2022. Celsius also mentioned on November 20, 2022, that its upcoming court date is scheduled for December 5, 2022, where plans have been made on advancing discussions around its Custody and Withhold accounts, among other concerns. 

(With insights from Cointelegraph) 

Also Read: Stolen funds from FTX converted from ETH to Bitcoin

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First published on: 21-11-2022 at 11:32 IST