- The ultimate examiner’s assessment on Celsius Network reveals the cryptocurrency lender’s poor management and inefficient business practices.
- Since the company began using customer assets to pay for its costs and rewards in at least 2020, difficulties have existed at Celsius.
The failure of Celsius Network, formerly a market leader in bitcoin lending, serves as a warning to anyone considering entering the risky realm of cryptocurrencies.
The difficulties faced by the now-bankrupt cryptocurrency lender are described in a 689-page examiner’s report. It is claimed that issues started at least in 2020, when Celsius began diverting customer funds to pay for operating costs and bonuses.
The findings of the bankruptcy examiner’s four-month inquiry was revealed into the causes of Celsius’ failure and the purported lies that company leaders allegedly told clients as the firm neared bankruptcy.
In June 2022, during a liquidity crisis, the business stopped withdrawals and transfers, citing “severe market conditions.” In just two months, the cost of bitcoin had been cut in half. Celsius’s CEO and founder filed into bankruptcy in June.
A court-ordered examiner’s report made several references to “Ponzi scheme,” with one of them being along the lines of :
The following is probably the best example from a court-ordered examiner’s report that made repeated references to a “Ponzi scheme”:
Dean Tappen indicated in an internal message on January 19, 2021, that his title at Celsius should be “Ponzi Consultant.”
A corporation of Celsius’ scale should have put in operation the essential risk management procedures and a liquidity risk strategy, according to the examiner.
The frictional wallets used to enable consumer withdrawals were frequently “topped off” with wallets containing new user deposits. Additionally, despite the liquidity problems, withdrawals were processed.
The investigators discovered that Celsius’s business strategy was fundamentally flawed.
The former federal prosecutor in charge of the investigation into the corporation, Shoba Pillay, claimed in a letter that “Celsius Network on a stand-alone basis has been bankrupt since inception.”
Another viewpoint, elaborated in the study, is that Mashinsky and other workers were covertly selling while Celsius was utilising money from investors and customers to support the price of its native token, CEL.
In fact, the corporation was already $600 million in the red when it began keeping track of its assets and liabilities coin-by-coin in May 2021.
The fact that Celsius provided customers an interest rate for borrowing their assets that was unrelated to the return on investment from those assets was one factor in why Celsius continually ran a deficit.
It turned out that the Celsius Network, a cryptocurrency lender that offered clients 17% yearly rates on their investments, was in fact a hoax.