They investigate a Ponzi scheme with cryptocurrencies of a company that went bankrupt

Celsius promised high returns to its clients that it could not sustain with its own capitalization. (REUTERS/Dado Ruvic/Illustration/File Photo)

In the last few hours, it was discovered that Celsius, a bankrupt cryptocurrency lending company, would have defrauded its clients through an alleged Ponzi scheme.

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After a very negative year 2022, virtual currencies began 2023 with an upward trend, encouraged by expectations of a recovery in stock indices on Wall Street.

The fact came to light after the independent investigator, Shoba Pillay, who had been appointed by the court to investigate the case, revealed that the company deceived its customers and was marketing itself as a different company from the one it operated, such as Business Insider detailed.

Celsius filed for bankruptcy in July 2022 after freezing his accounts amid a cryptocurrency selloff that sent the value of Bitcoin (BTC) and Ethereum (ETH) plunging more than 60 to 70 percent from their highs. reached in November 2021.

Alex Mashinsky, fundador de Celsius. (Reuters TV via REUTERS REFILE – CORRECTING LOCATION)

The company had caught the eye of its customers with the promise of high-interest returns and readily available loans; In short, it was presented as an alternative to the traditional “big banks”, as Pillay wrote.

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“The business model that Celsius advertised and sold to its clients was not the business that Celsius actually operated,” Pillay said in his 689-page filing with the Southern Bankruptcy Court in New York City.

In addition, the investigator in the case revealed that Alex Mashinsky, founder of Celsius, was forced to make increasingly risky investments to ensure that his clients enjoyed the high-interest rewards they had promised, making loans that were not fully collateralized and investing in other cryptocurrencies and mining. This mechanism worked for him during the rise of cryptocurrencies worldwide, in the years 2021 and 2021.

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Ultimately, the company’s collapse meant its CEL token dropped from its high of $8 in June 2021 to the current $0.59 and is one of the highest-profile crashes, as detailed by Insider.

Celsius had no problems during the cryptocurrency boom in 2020 and 2021. (Computer Today)

What is known is that Celsius allegedly dedicated a large part of its resources to artificially inflating the price of CEL, its token, without having “effort” to define the remunerative rates offered based on its performance.

In fact, Pillay said that the company spent $558 million buying its own CEL token on the market, in an attempt to prop up its declining assets.

“In effect, Celsius bought every CEL token on the market at least once, and in some cases twice,” Pillay wrote in his report.

The same company acknowledged that the interest rates paid to clients had no correlation to the return the company generated by investing the assets of its platform users.

All this could show that Celsius would have abused the trust of its clients and did not show professionalism with respect to the core of its activity, cryptographic loans.

To answer the question, Pillay gave direct definitions, according to her, “in some cases”, between June 9 and 12, 2022, Celsius would have used the deposits of new clients to be able to process the asset withdrawal requests of others.

Such a practice defined in this way would respond to a Ponzi scheme, in which scammers who cannot generate enough income to fulfill their beautiful promises, use to reassure their victims and attract new ones, at least for a while, as detailed in the Journal du Coin.

According to the French media, Celsius’ lawyer proposed a payment plan to creditors that would be based on the issuance of a new CEL token; we will have to wait and see if the clients return to place their trust in the company or if they reject the proposal.

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