Prior to its bankruptcy, the Celsius cryptocurrency lending platform operated like a Ponzi scheme

A report that lifts the veil on the company’s workflow worthy of a Ponzi scheme. Clients’ money especially enabled his boss to carry out operations for his sole enrichment.

From FTX to Celsius, there is only one step. Last July, cryptocurrency lending platform Celsius went bankrupt after failing to manage a bear market liquidity crisis.

Since 2017, Celsius has been one of the major cryptocurrency betting or lending platforms. Its well-marketed model was enough to attract customers. By depositing their cryptocurrency on the platform, they can earn up to 18% interest. Too good to be true. After its collapse, more and more voices wondered if it was a Ponzi scheme, this fraudulent system consisting in financing the “interests” of the first investors with the stakes of the newcomers.

Use of customer funds

In this context, independent examiner Sobha Pillai was commissioned by the New York court responsible for the Celsius bankruptcy, in order to understand the old statute model. I just posted 700 page report Which lifts the veil on its work, far from the glamor that has allowed it to conquer its 1.7 million users.

The report begins: “Behind the scenes, Celsius conducted its business in a radically different way than it presented itself to its customers in every respect.”

While the platform showed signs of weakness last June, “serious problems” emerged early in 2020, “after Celsius began using client assets to fund operating expenses and bonuses,” the report said. For example, to fund certain internal operations, Celsius has used its customers’ deposits as collateral for stable loans.

Furthermore, the report claims that the Celsius model worked like a Ponzi scheme. This was the case, for example, last June, before Celsius froze its customers’ withdrawals on June 12th.

“Between June 9 and 12, Centennial directly used new customer deposits to fund customer withdrawal requests,” the report said, comparing the operation to a Ponzi scheme.

CEL symbol with an ambiguous role

Moreover, Celsius has also inflated the value of its parent token, CEL, by “significantly” increasing its purchases of the token but not with any money. With “as always,” the users’ money plus the money of the investors in Celsius Fundraisers, Celsius managers shamefully admitted. The result: Between March 2020 and June 2021, the price of the CEL token increased by 14.751%, according to the report.

Similarly, the company was also selling its token according to an internally defined strategy cited by the report. “The more CEL we sell, the more CEL we can buy back, the more attractive the CEL markets are, and the more CEL orders we receive, the more value our money will have,” the report said.

Primate of Celsisus also took the opportunity to enrich himself personally. Thus Alex Mashinsky sold no less than 25 million CEL, making no less than $68.7 million from these sales, despite repeatedly asserting in front of his clients that he did not sell his company’s tokens. His company currently owns 95% of all CEL tokens in circulation.

More revelations that could not but deal a blow to the cryptocurrency market, which is barely trying to recover from the bankruptcy of the giant FTX.

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