An independent U.S. court-appointed examiner reported: Celsius It used customer deposits to back CEL tokens and enrich the two founders of the company.
A report by former prosecutor Shobha Pillay investigates allegations that a failed cryptocurrency lending platform operated like a Ponzi scheme. She uncovered evidence of risky trading, such as “buying up” CEL to boost token prices, with insiders “profiting the most” through timely cashouts.
Working with Celsius Tokens
After bankruptcy rumors, Celsius suspended withdrawals on June 12, 2022, citing “extreme market conditions.” The company said at the time that this was necessary to “stabilize liquidity and operations,” sparking further chatter that things were worse than leaving them alone.
Celsius filed for bankruptcy on July 13, 2022, revealing a black hole of about $1.2 billion in its balance sheet.
“As of July 13, 2022, the company had total liabilities of $5.5 billion and assets of $4.3 billion. Celsius owes consumer users (not institutional partners) more than $4.7 billion. It says there is.”
Since then, multiple allegations of wrongdoing have been leveled against the company and management, most notably co-founder and CEO Alex Mashinski.
For example, in July 2022, former Celsius Compliance Director Timothy Cradle whistled to senior management discussing the deliberate price manipulation of the CEL token.
“I don’t know how to describe it.
Confirmed by Court Investigation
According to Pillay’s report, Celsius’ business model was to collect deposits from retail customers and invest the funds in the “wholesale market.” The capitalization of that business was partially brought about by the sale of the CEL token.
CEL has been an integral part of the business in that the company buys its own tokens on the secondary market and uses the platform to distribute them to customers as rewards.
There were two reasons for this. One to incentivize new business and the other as a demand driver to raise his CEL price. This business model was described as a self-sustaining “flywheel”.
Pillay confirmed that starting in 2020, the company is actively buying its own tokens and working to raise the CEL even higher. Celsius said he spent $558 million in token purchases, but this was not disclosed as the main reason for the rise of his CEL token.
“The business model that Celsius advertised and sold to customers was not the business that Celsius actually ran.”
But this ended up paying more than Celsius generated revenue, exposing the company’s “flywheel” approach to business was right.
By cashing out CEL tokens from 2018 to the bankruptcy filing date, Mashinsky has personally benefited at least $68.7 million. At the same time, co-founder Daniel Leung has netted at least $9.7 million.
