Last July, the major cryptocurrency lending company Celsius declared itself bankrupt. It seemed like very brutal news, but in the end it wasn’t all that brutal. In fact, the platform would have been insolvent since 2019. According to the regulator, the cryptocurrency lending company lied about their financial situation. With this discovery, Celsius is plunging further into chaos.
Photo credit: BeinCrypto
The haemorrhaging doesn’t stop. The American company thought it was finished for good when it filed for bankruptcy 2 months ago. Unfortunately, on Wednesday the Vermont Department of Financial Regulationfiled a document attacking the company’s finances. The department claims that CEO Alex Mashinsky made false statements to his clients. The report even describes these as “misleading”. All of the company’s problems are said to have started in 2019.
Manipulated tokens
But the bankrupt company did not stop there. The report also states that the platform manipulated the token price. The company is accused of using investor funds to buy CEL tokens in order to pay interest to the custodians.
The document states that “ Credible allegations have been asserted publicly through letters to the Court and otherwise that Celsius and its management engaged in improper manipulation of the CEL token price, including using the proceeds of its investors’ deposits to acquire CEL tokens and increase its net CEL position.”
The report also states that Celsius Network’s insolvency dates back to 2019. The fall in share prices in 2022 would have triggered the company’s bankruptcy. However, it was above all the strategy adopted by the company that was not viable.
Ponzi methods used
But that’s not all. The regulator is directly accusing the company of using Ponzi schemes. Ponzi schemes are fraudulent financial arrangements. Under this scheme, customers’ investments are generally remunerated by funds provided by new entrants. While the term “Ponzi” is not clearly stipulated by the regulator, the words used make a very clear reference to it.
The cryptobank had “never generated sufficient revenue to support the returns paid to investors. This demonstrates a high level of mismanagement and also suggests that, at least at times, returns were probably paid out of the assets of new depositors.”
Moreover, this is not the first time that Celsius Network has been associated with these methods. Last July, a former partner of the company (KeyFi Inc) accused the company of using this fraudulent system.
So the company’s nightmare is not over. After having driven its 2 million customers to despair, the company is plunging further into the abyss. There is now little chance of Celsius Network recovering. However, the platform is currently still under Chapter 11 bankruptcy protection.
