On Tuesday, a U.S. court-ordered examiner’s report revealed that the bankrupt cryptocurrency lender Celsius Network had used investor and customer deposits to prop up its own token. At the same time, two of its founders pocketed millions from these sales. Crypto lenders like Celsius, who pledged high-interest rates on cryptocurrency deposits during the COVID-19 pandemic, flourished in popularity – only for customers to experience an abrupt halt when New Jersey-based Celsius froze all withdrawals before filing bankruptcy in July.
CEL Is Not A Ponzi Chart, But It Doesn’t Live Up To Its Promises.
Appointing former prosecutor Shoba Pillay as an independent examiner, Judge Martin Glenn of the U.S. Bankruptcy Court probed Celsius customers’ claims that the company was operating a Ponzi scheme and investigated its effective utilization of cryptocurrency deposits in September. Despite her report not reaching any conclusion regarding whether Celsius is a Ponzi scheme, it has provided sufficient evidence for Glenn to make his own opinion on this matter.
The examiner uncovered that Celsius could not generate enough profit to fulfill the high rewards promised to customers and resorted to using newer deposits for customer withdrawal requests in June 2022. Additionally, during a company chat discussion, Dean Tappen (Celsius Coin Deployment Specialist) even labeled himself as a “Ponzi consultant” and later went on further describe the practice of utilizing customer stablecoins for repurchasing its own proprietary tokens as being “very Ponzi-like.”
Mainly People in Celsius Profited From Celsius Transactions.
In 2020, Celsius initiated an aggressive buying campaign to raise the price of its CEL tokens. This spending resulted in at least $558 million being invested into purchasing their own token. Consequently, this skyrocketed the prices and greatly benefited those who held most of it – founder Alex Mashinsky and co-founder Daniel Leon, who profited nearly $80 million from selling these tokens between 2018 and their bankruptcy filing.
According to the report, Mashinsky’s misstatements were alarmingly widespread and included in both video broadcasts and tweets. Furthermore, Celsius executives kept an internal list of his incorrect statements yet decided to refrain from making any effort to inform thousands of audience members who heard these lies in real-time – all without their knowledge or consent!
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