Celsius' business model different from that advertised -U.S. bankruptcy examiner (updated)
31/01/2023 08:40
(Adds details, background)
SINGAPORE, Jan 31 (Reuters) - The business model that
crypto firm Celsius Network had advertised and sold to its
customers was not the business it actually operated, a U.S.
court-ordered examiner report released on Tuesday showed.
From its inception, Celsius and its founder Alex Mashinsky,
who is currently facing fraud allegations in the United States,
did not "deliver" on its promises surrounding its native CEL
token and other business activities, the report stated.
It added that Celsius's stablecoin deficit between May 28,
2021 and its bankruptcy filing last year amounted to a
billion-dollar hole in its assets, as 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 deficit of
$1.19 billion on its balance sheet.
Celsius representatives did not immediately respond to
emailed requests for comment sent during nighttime in the United
States.
Crypto lenders such as Celsius boomed during the COVID-19
pandemic, drawing depositors with high interest rates and easy
access to loans rarely offered by traditional banks.
Many have since collapsed.
Similar to a bank, Celsius gathered crypto deposits from
retail customers and invested them in the equivalent of the
wholesale crypto market, including “decentralized finance” or
DeFi sites that use blockchain technology to offer services from
loans to insurance outside the traditional financial sector.
U.S. Bankruptcy Judge Martin Glenn, who is overseeing the
Chapter 11 case, appointed former prosecutor Shoba Pillay as an
independent examiner in September.
She was tasked with investigating accusations by Celsius
customers that the company operated as a Ponzi scheme and also
with reporting on its handling of cryptocurrency deposits.
(Reporting by Rae Wee,a dditional reporting by Alun John;
Editing by Clarence Fernandez and Louise Heavens)
((Rae.Wee@thomsonreuters.com;))