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Last year, the Bankruptcy court appointed Shoba Pillay as Examiner to investigate whether crypto lender Celsius was a Ponzi scheme. While her conclusion in her 476 page final report doesn’t state whether or not it was a Ponzi scheme, she wrote, We have already pointed out that Celsius suffered substantial losses well before it went bankrupt.The business model Celsius advertised and sold to its customers was not the business that Celsius actually operated.” The reviewer alleges many misrepresentations from Celsius and his former CEO Alex Mashinsky in particular. Mashinsky is being sued for fraud by the U.S. Attorney General.
One of the most devastating criticisms has to do with the enterprise CEL token. Like ftt in the case of ftx collapse, the token has played a role in the collapse of the company. This is accompanied by a shortage of files and very poor risk management.
Highlights
- Celsius spent $558 million propping up CEL token
- CEO Mashinsky sold/redeemed $68 million in CEL chips.
- Rather than selling user assets, user funds were used as collateral to borrow funds that were used to sustain the price of the token.
It is alleged that Celsius was the principal supplier of this token and that it spent significant amounts – at least $558 million – to support the token price. 'Indeed, Celsius has bought each chip on the market at least once and in some cases twice,' says the reviewer.
In 2020, celsius "significantly increased its cel purchases with a view to increasing the price of cel. Instead of buying the LEC at the time it was due to pay rewards, Celsius started timing its purchases to support the LEC price." The business was "hidden" to clients.
A major beneficiary of that regime was insiders in degrees Celsius. When Mashinsky's CEO sold chips, they often increased the size of their chip purchases.
According to the report, Mashinsky directly sold or swapped at least $68.7m in CEL tokens. His cto, nuke goldstein, sold $2.8M and strategy director Daniel Leon sold $9.74M.
A staff member stated, “we are using users usdc to pay for employees worthless cel . . . All this because society is the one that inflates the price to obtain the valuations and be able to resell to society." at one point, the company used the bitcoin and ether user as a guarantee to purchase this, but moved to stablecoins because the rise in the price of crypto meant he had an extra $300 million liability to repay the loans.
There seemed to be a consciousness that the use of customer deposits to purchase this was incorrect. Thus, instead of selling client deposits, he used them as collateral for loans, and rolled out the proceeds of the loan to support the price of this.
The balance sheet in degrees Celsius was the second beneficiary of this high award, benefiting Mashinsky as the biggest shareholder. We previously reported that Celsius made significant losses long before its bankruptcy.
“In 2021, Celsius recognized losses of over $800 million primarily as a result of investments with Equities First Holdings LLC, Grayscale, KeyFi Inc, and Stakehound. In 2021, Celsius lost more than $800 million mainly due to its holdings in Equities First Holdings LLC, Grayscale, KeyFi Inc. and Stakehound.
Celsius did not report these losses to his clients when they occurred," the reviewer said. Despite including the figure on its balance sheet and a fundraising of $690 million in late 2021, its liabilities outstripped its assets by more than $100 million by that stage.
