- An investigation into Operation Celsius revealed that customer and investor funds were used to prop up the price of CEL
- The report also found that the cryptocurrency lending platform has been insolvent since its inception
A new report published by a court-appointed auditor sheds light on the operations of a cryptocurrency lender – Celsius – prior to declaring bankruptcy. An investigation by Shoba Pillay indicates that the stated business model for clients differs from Celsius’ actual operations.
He also stated that the cryptocurrency lender had “broken on its promise of transparency from the start.” The report further alleged that “Celsius Network (USA) has been insolvent on an independent basis since its inception.” The crypto lending platform filed for bankruptcy in July 2022, a month after it stopped taking customer withdrawals.
Celsius was involved in price gouging
The report stated that the platform deceived its customers from the start. During its creation, it claimed to have raised $50 million from the ICO sale, when in reality it only raised $32 million. In addition, the crypto lending platform also bought CEL tokens with the aim of driving up the price. The continuation of the buying spree has increased the price of CEL by 14,751% in June 2021. The report claimed,
Instead of buying CEL when it needed to pay bonuses, Celsius began timing its purchases to support the price of CEL by creating market activity. Celsius also began placing “rest” orders to buy CEL, which are triggered if the price of CEL falls below a specified amount.”
In addition, the report claimed that market manipulation increased the value of the company’s balance sheet to $1.5 billion by December 2021. The increase in price also played in favor of Celsius insiders holding the token, including Alex Mashinsky – former CEO, and Daniel Lyon. Founding partner. Both CEL executives sold at least $68.7 million and $9.74 million between 2018 and 2022
“Percentage often attempted to protect CEL from price drops attributed to Mr. Mashinsky’s sale of large quantities of CEL’s personal holdings. As a result of Mr. Mashinsky’s sales, Percentage often increased the volume of backorders for the purchase of all CELs that Mr. Mashinsky and his other companies sold “
In addition, the cryptocurrency lender used its customers’ Bitcoin (BTC) and Ethereum (ETH) to buy back CEL tokens. Because of a faulty reporting system, he failed to track the lack of funds. Celsius had to pay close to $300 million to make up for the shortfall in BTC and ETH. This created a hole in the stablecoin’s balance sheet, which continued to grow over time due to buybacks and other losses.
The report said,
“Why did you buy Celsius CEL to pay bonuses instead of using the CEL you keep in the locker,” he admitted, the answer lies in who has the biggest CEL. Another manager said more bluntly: “We spent all our money paid to managers and trying to support Alex [sic] Net worth in CEL symbol.