key takeaways
- Celsius used customer funds to increase the price of its CEL token.
- It also used new deposits to fund customer withdrawals.
- Celsius CEO Alex Mashinsky and other Celsius executives cashed in millions selling their stakes in CEL, despite claiming otherwise.
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Celsius was raising the price of its CEL token by using customer funds, according to a new report. Even the employees commented on how the Ponzi scheme looked like.
A Ponzi in many ways
An independent examiner appears to have confirmed something that crypto-natives have suspected for months.
In his warrant, mammoth 689 page report In Celsius, Shoba Pillay indicated that the defunct crypto lending company operated in a very different way than how it advertised itself, with parts of the business being run in a Ponzi-like fashion.
According to Pillay, Celsius used client funds to prop up the price of the company’s token, CEL. Even Celsius employees, such as coin development specialist Dean Tappen, described the strategy as “very Ponzi-like.” The company would also sell CEL in private over-the-counter transactions and buy back the same amount on the public markets to increase prices. Pillay outlines a number of other ways that Celsius created a market for its own token, including programmed buys and placing quiescent limit orders.
Meanwhile, former Celsius CEO Alex Mashinsky sold more than $68 million worth of CEL tokens between 2018 and 2022, despite publicly stating during his AMAs (“Ask Mashinsky anything,” as he called them) that he was not a salesman. Celsius co-founder David Leon also cashed in nearly $10 million, and former Celsius CTO Nuke Goldstein also parted with $2.8 million.
Celsius also used deposits from new clients to fund client withdrawals in the three days prior to its freezing customer withdrawals total. “Had Celsius not instituted the pause and the bank run continued, deposits from new customers would inevitably have become the only liquid source of coins for Celsius to fund withdrawals,” Pillay asserted.
The report further claimed that Celsius had suffered more than $800 million in unreported losses in 2021 from investments in Grayscale, KeyFi, Stakehound and Equities First Holdings.
Disclosure: At the time of writing, the author of this article owned BTC, ETH, and various other crypto assets.
