Celsius Network LLC, a crypto lender that filed for bankruptcy in July 2020, failed to record some 7,000 intercompany transfers worth billions of dollars in the three months leading up to its filing. This is according to court filings from Thursday, which show that the company did not properly record transactions between its affiliated companies.
The court filings from Thursday revealed that the company was holding a potential claim of around $9.1 billion against its affiliate, Celsius Network Limited (CNL), based on its books and records. However, the filings also stated that this number does not take into account the shortfalls in record keeping, including the estimated 7,000 unrecorded transactions.
The statement filed on Thursday reflects the company’s books as of the bankruptcy petition date on July 14. According to the review of the company’s books, intercompany transfers “in many cases” were not recorded at all. This means that the 7,000 unrecorded transfers were not reflected via intercompany transactions in the accounting books and records.
As a result, the statement said that it may not be possible to fully reconstruct the intercompany claim. If it were at all possible, it would be a time and cost intensive forensic accounting exercise that would likely require the engagement of a forensic accounting firm to manually reconstruct every intercompany transaction at a significant cost to the Debtors’ estates.
Celsius Network LLC has presented a sale plan to the court in order to facilitate the company’s reorganization. The company’s best estimate for the full claim held by the LLC against CNL is $3.5 billion, according to the statement.
The lack of record keeping from Celsius Network LLC highlights the importance of proper record keeping for businesses. Without proper record keeping, it can be difficult, if not impossible, to accurately reconstruct a company’s financial position. This can lead to significant losses for the company and its stakeholders, as is the case with Celsius Network LLC.
At the same time, the lack of record keeping also highlights the importance of engaging a forensic accounting firm to manually reconstruct intercompany transactions. This is especially true for companies that have a large number of intercompany transactions, as it can be difficult to accurately reconstruct these transactions without the help of a professional.
Overall, the court filings from Thursday show the importance of proper record keeping for businesses. Without proper record keeping, it can be difficult, if not impossible, to accurately reconstruct a company’s financial position. This can lead to significant losses for the company and its stakeholders. At the same time, it also highlights the importance of engaging a forensic accounting firm to manually reconstruct any intercompany transactions. This is especially true for companies that have a large number of intercompany transactions, as it can be difficult to accurately reconstruct these transactions without the help of a professional.
