Celsius Creditors Now Seek to Unmask “Suspicious” FTX Crypto Trades

The cryptocurrency market is no stranger to incidents of cyber breaches and market manipulation. According to recent news coming to light, it has been alleged that the popular crypto lending platform Celsius Network is involved in market manipulation. How this recent incident affects the fortunes of Celsius Network moving forward remains to be seen. 

Also read : What Is Celsius? (CEL)

CEL Token Fraud Allegations

According to a recent report by Bloomberg, a committee which represents creditors of Celsius has asked to subpoena FTX exchange for information that could help find out the identity of users behind the ten crypto wallets allegedly involved in suspicious trades in CEL, the Celsius native token between April and August 2022. 

The Celsius creditors suspect that the suspected FTX users have engaged in price manipulation of CEL tokens through these trades. This act seriously violates cryptocurrency market regulations. Blockchain consultant Elementus Inc. has been hired by the committee to look into the matter and determine the legitimacy of the trades. 

The Findings by Elementus Inc.  

Elementus has already identified 947 transactions over 3 days which shed light on a   direct relationship between CEL token withdrawals and deposits and the ten suspected private crypto wallets and those on the FTX exchange. The trades coincide with the date on which Celsius paused customer withdrawals (June 12) and its Chapter 11 filing (June 13). 

Whether or not the trades were legitimate will have a direct impact on the on-going Celsius bankruptcy proceedings. While the CEL token was valued at 81 cents on June 13, the company now values it at 20 cents in the proposed Chapter 11 plan. The company argues that the 81-cent price at the time of bankruptcy does not accurately represent CEL’s fair market value. 

Tech Industry Heavyweights Joining Celsius Network Auction

Celsius Network has attracted new bidders as stated by Bloomberg. Reports indicate that two new bidders, Blockchain Recovery Investment Committee, backed by Gemini Trust and Fahrenheit LLC, have joined NovaWulf Digital Management in a three-way bid. The aforementioned committee has won approval from the court for asserting claims against the Celsius network on behalf of account holders, such as fraud and negligent misrepresentation. 

Celsius network has been plagued with allegations of misrepresentation and fraud since it filed for bankruptcy with a $1.19 billion deficit. According to a lawyer representing the official unsecured creditor’s committee, the company released false statements to the public that assured that keeping money with Celsius is safer than a bank. 

New bidders joining the auction indicate renewed interest in acquiring the failing crypto loan platform. However, the company’s reputation has taken a massive hit due to the fraud misrepresentation allegations. All these issues should be addressed by any potential bidders if they want to restore the trust of investors. 

About Celsius Network 

Celsius Network is a now-bankrupt crypto lending company which allows users to deposit cryptos into a wallet to earn a percentage yield. They could also take out loans using cryptos as security. The company suffered a setback when it paused transfers and withdrawals, subsequently filing for Chapter 11 bankruptcy on June 13^th,  2022. 

Celsius Network aimed to replace their traditional banking system with easy access to crypto loans. It also paid interest on held cryptos, including in CEL, its native token. It initially raised $50 million in its ICO in 2018 and then completed an equity round of £24 million in 2019 at a valuation of $140 million. 

After filing for Chapter 11 bankruptcy, the company declared a $1.2 billion balance sheet deficit. The company had $167 million as cash on hand, which would be allocated toward supporting operations during its bankruptcy. Of the total liabilities of $5.5 billion, Celsius owed $4.7 billion to unsecured creditors. 

The recent incident involved a group of creditors filing a class action lawsuit against Celsius. It seeks $5.2 billion as well as an undeclared amount of damages which will be determined later at trial. 

Conclusion

When it first launched, Celsius Network looked like it was ideal for beginners wanting to get into the crypto lending game by making the entire process simple. However, the recent legal tussles experienced by the company have put its future into question. 

Frequently Asked Questions

How Much Did Celsius Network Lend Out to Users? 

As of May 2022. Celsius Network has lent out $8 billion to clients, with $12 billion AUM (Assets under management).

When Did Celsius Network First Experience a Security Breach? 

Celsius Network confirmed on April 16^th, 2021 that a security breach had compromised a third-party server with customer data. 

Why Did Celsius Network Pause All Customer Withdrawals? 

Celsius Network paused all customer withdrawals on June 13^th, 2022, citing extreme market conditions to stabilise liquidity and operations.