Celsius Network Accused Of Being A Ponzi Scheme

July 8, 2022 3:15 pm Comments

It seems the situation of Celsius Network has taken a turn for the worse in the recent couple of weeks.

Recently, the major crypto lender Celsius Network gained a lot of attention from the crypto industry when it announced that it would be pausing all withdrawals from its platform.

This create a lot of concern on whether or not the company would be able to fulfill its financial obligations to its users and whether or not they would be able to retrieve their digital assets.

Just yesterday, it was reported that a new lawsuit has been filed where a former money manager of the company claimed that the company used customer funds to manipulate the price of its own token which ended up losing a lot of the funds.

As a result, the company is being accused of being a Ponzi scheme.

Bloomberg shares:

Celsius amassed more than $20 billion in assets by offering interest rates as high as 18% to customers who deposited their cryptocurrencies.

Founder Alex Mashinsky dismissed skepticism about whether that was sustainable, saying the company was able to earn high rates itself.

But Celsius was in fact struggling to cover the payouts and suffered “severe exchange rate losses” due to the fluctuating values of different coins, according to a complaint filed Thursday in New York state court by KeyFi Inc., the company founded by the former money manager, Jason Stone.

Stone, who called Celsius a Ponzi scheme in the complaint, said it cheated him out of potentially hundreds of millions of dollars in pay.

So far, Celsius Network has not responded or commented to these claims and their lawyers have declined to comment as of this time.

These accusations come during a time where the crypto market has been facing a major credit crisis which many believe to have strengthened the current bear markets.

Major hedge funds like Three Arrows Capital have been liquidated and platforms like Voyager Digital have already declared bankruptcy which added more fuel to the fire.

Ever since the pausing of the withdrawals, customers of Celsius Network still have not been able to access their funds and the chance of that happening seem to be looking slimmer as time goes on.

CNBC reports:

Another allegation revolves around the digital coin called CEL. That is Celsius’ own token. Celsius says that if users accept their interest payment in the form of CEL, they could earn higher interest than those who don’t.

The lawsuit alleges, however, that Celsius engaged in transactions to artificially inflate the price of CEL.

“The purpose of this scheme was both fraudulent and illegal: Celsius induced customers to be paid in CEL tokens by providing them with higher interest rates,” the lawsuit claims.

“Then by purposefully and artificially inflating the price of the CEL token, Celsius was able pay customers who had elected to receive their interest payments in the form of the CEL token even less of the crypto-asset.”

Stone also alleges that Celsius CEO Alex Mashinsky was “able to enrich himself considerably.”

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