A new report has revealed that Celsius was using customer funds to increase the value of its CEL token.
- Celsius used its customers’ funds to pump the price of its native CEL token
- The company used new deposits to fund customer withdrawals
- Celsius CEO Alex Mashinsky and other top executives cashed out millions by selling their holdings, despite claiming that they did not
Reports have revealed that Celsius was pushing up the price of its CEL token by using client funds. Even employees commented on how Ponzi-like the scheme seemed.
A Ponzi In Multiple Ways
An independent examiner appears to have confirmed something crypto natives have suspected for several months now.
In her court-ordered, extensive 689-page report on Celsius, Shoba Pillay said that the defunct crypto lending firm operated in a majorly different manner from the way it advertised itself – and that parts of the business were operated in a Ponzi-like manner.
Based on a statement by Pillay, Celsius used customer funds to prop up the price of the firm’s own token, CEL. Even the Celsius employees – including Coin Development Specialist Dean Tappen – described that Strategy as ‘very Ponzi-like.’ The firm would also sell CEL in private, over-the-counter transactions and buy back the same amount in public markets to raise prices.
Pillay describes several other ways Celsius was market-making for its token, including timed purchases and placing resting limit orders.
In the meantime, former Celsius CEO Alex Mashinsky sold over $68 million in CEL tokens between 2018 and 2022 – it happened despite publicly saying during his AMAs (“Ask Mashinsky Anything,” as he called them at the time) that he was not a seller. David Leon, Celsius co-founder also cashed out nearly $10 million, and former Celsius chief technology officer Nuke Goldstein sold $2.8 million too.
Celsius also used new customer deposits to fund withdrawals in the three days leading up to its freezing of client withdrawals altogether. Pillay said:
“If Celsius had not instituted the pause and the run on the bank continued, new customer deposits inevitably would have become the only liquid source of coins for Celsius to fund withdrawals.”
The report also alleged that Celsius had suffered more than $800 million in unreported losses in 2021 from investments in KeyFi, Grayscale, Equities First Holdings, and Stakehound.