• U.S. court-ordered examiner report revealed that the bankrupt cryptocurrency lender Celsius Network inflated its balance sheet as two of its founders paid out millions using investor funds and client deposits to support its own coin.
• During the COVID-19 pandemic, cryptocurrency lenders such as Celsius saw a surge in business, luring depositors with high interest rates and convenient loan access.
• Following the suspension of customer withdrawals from its platform, New Jersey-based Celsius filed for bankruptcy in the United States in July of last year.
Celsius Network’s Bankruptcy
U.S. court-ordered examiner report made public on Tuesday revealed that the bankrupt cryptocurrency lender Celsius Network inflated its balance sheet as two of its founders paid out millions by using investor funds and client deposits to support its own coin (CEL). During the COVID-19 pandemic, cryptocurrency lenders like Celsius saw a surge in business, luring depositors with high interest rates and convenient loan access. Following the suspension of customer withdrawals from its platform, New Jersey-based Celsius filed for bankruptcy in the United States in July of last year.
Examiner Appointed
Shoba Pillay, a former prosecutor was designated as an independent examiner by U.S. Bankruptcy Judge Martin Glenn who is presiding over the Chapter 11 case in September 2020. She was given responsibility to look into complaints from Celsius clients that it ran like a Ponzi scheme and also reporting how it handled bitcoin deposits.
Deposit Collection & CEL Currency Creation
Retail clients‘ cryptocurrency deposits were collected by Celsius which then used them to buy cryptocurrency in equivalent amount at wholesale market prices to fund their business by inventing and selling their own crypto currency called CEL . The company promised customers that it would purchase CEL on secondary market and deliver it to them as rewards which will increase CEL pricing while simultaneously bringing new customers creating what they termed self sustaining “flywheel” effect but beginning 2020 ,Celsius went on “purchasing spree” driving up price of CEL higher than what it should have been under normal circumstances .
Insiders Benefits
The report showed that cofounders Alex Mashinsky & Daniel Leon had accumulated more than $25 million worth of crypto assets from company funds during their tenure at Celsius . This was done through several transactions benefiting both parties . It is alleged that these transactions were not properly disclosed or authorized by board or investors .
Response From Celcius
Requests for comment sent to several addresses including email address on Celcius website , PR company representing Celcius at time of bankruptcy & CEO Alex Mashinsky attorney did not receive any response immediately following publication although later night demands were made .