SINGAPORE (Reuters) – The business model that crypto firm Celsius Network had advertised and sold to its clients was not the business it actually operated, a U.S. court-ordered examiner’s report published on Tuesday showed.
Since its inception, Celsius and its founder Alex Mashinsky, who is currently facing fraud allegations in the United States, have not “delivered” on their promises around their native CEL token and other business activities, according to the report.
It added that Celsius’ stablecoin shortfall between May 28, 2021, and its bankruptcy filing last year amounted to a $1 billion hole in its assets, a result of its use of customer deposits to acquire stablecoins. .
Hoboken, New Jersey-based Celsius filed for Chapter 11 protection from creditors last July in Manhattan after freezing customer withdrawals from its platform. It listed a $1.19 billion shortfall on its balance sheet.
Representatives for Celsius did not immediately respond to emailed requests for comment sent overnight in the United States.
Crypto lenders like Celsius have grown during the COVID-19 pandemic, luring depositors with high interest rates and easy access to loans rarely offered by traditional banks.
Many have since collapsed.
Like a bank, Celsius collected crypto deposits from retail clients and invested them in the wholesale crypto market equivalent, including “decentralized finance,” or DeFi sites that use blockchain technology to offer services from lending to insurance outside of the traditional financial sector.
US bankruptcy judge Martin Glenn, who is overseeing the Chapter 11 case, appointed former prosecutor Shoba Pillay as independent examiner in September.
He was tasked with investigating allegations by Celsius clients that the company operated as a Ponzi scheme and also reporting on its handling of cryptocurrency deposits.
(Reporting by Rae Wee; Additional reporting by Alun John; Editing by Clarence Fernandez and Louise Heavens)
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