Celsius’ Mining Model Misleads Investors: Reports – Cryptopolitan

According to a report by a US court-appointed independent reviewer, Celsius used consumer deposits to back the CEL token and financially benefit two of the company’s founders.

Retired attorney Shoba Pillay has led an investigation into allegations that the bankrupt cryptocurrency lending company was operating as a Ponzi scheme. Insiders “benefited the most” from timely cash withdrawals, according to his discovery of evidence of shady dealings, which included “buying sprees” of CEL to raise the token price.

June 12, 2022 Celsius stopped withdrawals in response to bankruptcy reports citing “difficult market conditions”. At the time, the company said it was necessary to “stabilize cash and operations,” leading to more rumors that things weren’t as bad as they seemed.

On July 13, 2022, Celsius filed for bankruptcy, revealing an approximately $1.2 billion hole in its balance sheet. The company has $4.3 billion in assets as of July 13, 2022 and $5.5 billion in total liabilities. Unlike institutional partners, Celsius says it owes mainstream users more than $4.7 billion.

Since then, a number of allegations of wrongdoing have been leveled against the company and its executives, including co-founder and CEO Alex Mashinsky.

For example, the old Celsius Chief Compliance Officer Timothy Cradle has raised red flags about senior officials contemplating intentional price manipulation of the CEL token in July 2022.

“I don’t know what better way to put it. However, they were present, engaging in aggressive trading and driving up the cost of the token.

Celsius deceives investors

According to Pillay’s assessment, Celsius’ business strategy was to collect deposits from retail customers and use the funds to invest in the “wholesale market”. The sale of CEL tokens helped the company finance some of its operations.

CEL was a crucial part of the company’s operations as it would purchase its own token from the secondary market and provide it to platform users as a reward.

This was done for two reasons: first, to encourage new business, and second, to increase demand and drive up the price of CEL. An autonomous “flywheel” was used to define this trading strategy.

Pillay claimed that starting in 2020, the company has been aggressively buying its own token to boost the CEL even further. While failing to mention that it was the main factor behind the rise of the CEL token, Celsius had spent $558 million to buy its token.

“The actual Celsius business operated did not follow the business model that Celsius advertised and offered to its customers.”

However, this ultimately led to Celsius paying more money than he received, disproving the company’s “flying” business model.

Mashinsky personally benefited from at least $68.7 million by cashing in CEL tokens between 2018 and the date of filing for bankruptcy. Daniel Leon, another co-founder, received at least $9.7 million concurrently.