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Shoba Pillay, the independent examiner who has been looking into Celsius’ finances and conduct, filed the final report in the U.S Bankruptcy Court for the Southern District of New York earlier today. The report was long overdue by clients of the failed crypto lender and other stakeholders who have been following developments in this highly publicized bankruptcy case.
Celsius used client deposits to support withdrawals.
In September 2022, Bankruptcy Judge Martin Glenn appointed Pillay as examiner to investigate several allegations brought forward by Celsius's clients and creditors. These included mismanagement of users’ funds and a potential Ponzi scheme at play. The reviewer's report concluded that the crypto lender had misled its investors and clients by operating in a substantially different manner from that provided for in its contract.
Furthermore, the reviewer stated in the report that Celsius did not have the necessary risk management functions and liquidity risk framework that an enterprise of its size should have had in place.
According to the reviewer, Celsius used client deposits to finance increasing withdrawal requests before withdrawals stopped in early June 2022. On multiple occasions, portfolios containing new user deposits have been used to ‘complement' frictional portfolios which have been used to facilitate client withdrawals. Additionally, the processing of withdrawals despite the liquidity issues
“Celsius’s problems did not start in 2022. Rather, serious problems dated back to at least 2020, after Celsius started using customer assets to fund operational expenses and rewards”
Independent Examiner Shoba Pillay.
The report also highlighted shady activities around the cel native token, celsius. Celsius deposited client deposits as security for home loans. These stablecoines were used to finance the company's operations and to acquire btc and eth, which were later used to finance redemptions of securities.
According to the examiner, Celsius has on several occasions used stablecoins acquired through client funds to support the price of cel. As of April 2022, The specialist in deploying Celsius coins has described the Celsius practice of "using customers' stable coins" and "running out of customers' coins" to buy coins as "Big ponzi as." to the question of the former Vice-President of Treasury of the company about the source of cash used to finance the purchases of cel, A response was received from the parts deployment specialist, "The use as usual." the liquidity induced by these redemptions allowed the founder and former CEO of Celsius Alex Mashinsky to collect more than 68 million dollars through sales of this.
