Celsius allegedly used customer funds to support its own cryptocurrency token

February 01, 2023 By Monica Green

(Image Credit Google)

The crypto lender Celsius Network promised its customers that it would not be like any other bank—in fact, it would be larger than a bank—and that customers could "unbank" themselves by transferring some of their funds to Celsius. Users would become interested, and Celsius would cautiously manage your cryptocurrency on your behalf and invest it to generate income. Naturally, that was not the case for the thousands of individuals whose crypto was held hostage by the business when it declared bankruptcy. According to a new report from an independent investigator who was looking into the exchange, Celsius was using customer and investor funds to support its own base and pay for the withdrawals of other users, which was similar to a Ponzi scheme. An independent examiner stated in a massive 689-page report that was filed on Tuesday that the bankrupt network was using both investor and customer funds to boost the price of its native token, CEL. During that time, Alex Mashinsky, Daniel Leon, and Nuke Goldstein, who were co-founders of the company, sold millions of dollars worth of that token each over the subsequent few years, up until the point at which the business filed for bankruptcy. Crypto

More sales were made by Mashinsky than had previously been claimed, at least $68.7 million. According to the report, Leon sold CEL for at least $9.7 million, while Goldstein made off with $2.8 million. Shoba Pillay, a former U.S. prosecutor and partner at the international law firm Jenner & Block, was appointed by Judge Martin Glenn of the New York southern district bankruptcy court in September to report on the lender's management of customer funds and its own crypto holdings. She was also asked to determine whether any of Celsius's actions were even remotely comparable to Ponzi schemes. Also Read: CryptoWatch: Ripple's Irish Venture In addition, the document details how many times Mashinsky and other executives lied to Celsius customers about the amount of CEL the company bought and sold, frequently out of concern that the community would be "upset." According to the document, the company acquired a large quantity of CEL tokens "for the purpose of increasing CEL's price" in 2020. Additionally, Pillay asserted that Celsius's native token "had limited utility" due to the absence of a market for CEL adoption outside of the company's own platform. [caption id="attachment_67213" align="aligncenter" width="670"] Crypto

Image: Arab News[/caption] Despite the fact that employees were aware of this, the business continued its buying and spending spree. Gizmodo contacted the business for comment, but we did not receive a response right away. Pillay wrote that Celsius acted like a Ponzi scheme because it borrowed money from a Peter who didn't know about it to put crypto in Paul's pockets. Pillay wrote that the company began purchasing back CEL with funds deposited by customers because it was not making enough money from its crypto deployments. In 2021, there were shortfalls as a result of this and an ineffective tracking system. The business purchased stablecoins intended to fill the void once more with money from customers. The company had to pay customers $1.36 million over four years, from 2018 to June 2022, even though this was more than it made from deposits from customers. Pillay cited Celsius's Coin Deployment Specialist Dean Tappen, who claimed that Tappen's title ought to be changed to "Ponzi consultant" in 2021, though Tappen later attempted to retract his statement. In April of last year, Tappen also described Celsius's misuse of customer funds as "very Ponzi-like." A Digital Currency that Misses the Point

A Digital Currency that Misses the Point

According to Pillay's writing, "Celsius recognized that it should not use customer assets to purchase the coins necessary to cover liabilities to other customers." However, it argued that because it was not selling customer deposits but rather posting them as collateral to borrow the necessary coins, it could justify using customer deposits to close this balance sheet gap. The willingness of the cryptocurrency exchange and its CEO, Sam Bankman-Fried, to use customer funds to support its endeavors was the defining factor in the collapse of FTX. According to documents and those in charge of the company since it declared bankruptcy in November of last year, this included supporting the hedge fund Alameda Research and allowing FTX executives to lead lavish lifestyles. The Merkle tree is not too far away from the apple, or perhaps the crypto token. The vast majority of states in the United States are still looking into Celsius, and New York Attorney General Letitia James has filed a fraud lawsuit against Mashinsky.

By Monica Green

I am specialised in latest tech and tech discoveries.

Celsius allegedly used customer funds to support its own cryptocurrency token

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