Crypto lender Celsius may face a new lawsuit
Date: 2023-07-07 Author: Karina Ziganova Categories: BUSINESS
Investigators from the U.S. Commodity Futures Trading Commission (CFTC) have found that bankrupt crypto lender Celsius and its former CEO Alex Mashinsky violated U.S. rules shortly before the firm closed.
Sources familiar with the matter said Celsius was misleading investors and should have registered with the regulator. If a majority of CFTC members agree with this conclusion, the regulator could file a lawsuit in federal court as early as this month.
The U.S. Securities and Exchange Commission (SEC) and the Manhattan Federal Prosecutor's Office are also investigating Celsius.
How Celsius went bankrupt
Celsius offered loans and paid interest on crypto deposits that were higher than in traditional finance. At the same time, Mashinsky has repeatedly positioned the offers as safe as in banks.
However, the collapse of the Terraform Labs ecosystem led to a general downturn in the crypto market. The company stubbornly denied the big losses, but Celsius users started withdrawing money from the platform in large volumes. As a result, the crypto lender froze withdrawals in June 2022.
Analysts said that the crypto broker was experiencing liquidity problems. However, the company stated the opposite - supposedly this measure was supposed to help "stabilize liquidity." A month later, Celsius filed for bankruptcy.
Claims against Mashinsky
After going bankrupt, Mashinsky faced lawsuits due to false claims about the security of the crypto platform and concealment of the company's deteriorating financial condition. In particular, New York Attorney General Letitia James claims that he defrauded hundreds of thousands of investors, including more than 26,000 New Yorkers, of billions of dollars.
Mashinsky tried to dismiss the lawsuit, arguing that it "demonstrates a fundamental misunderstanding of the Celsius business and Mashinsky's role in it." However, the founder of Celsius believes that his firm collapsed due to "catastrophic external factors" and attacks from the New York attorney general's office.
