A former employee of Celsius Network, a cryptocurrency lending platform that recently stopped all transactions, accused the company of operating as a Ponzi scheme in a lawsuit this week.
Netizens were told that they could be interested in the cryptocurrencies they put into Celsius. Businesses have made a profit by investing people’s money in the cryptocurrency market. Celsius needed to make enough money on the transaction to generate those interests.In the midst of general economic uncertainty, when the crypto market collapsed last month, Celsius frozen All withdrawals, swaps, and transfers on the network.
Now, one of the former asset managers claims in a filing with the New York County Supreme Court that all this was delegated only to a dirty, unsustainable Ponzi scheme. Jason Stone, CEO and founder of KeyFi, who managed billions of dollars worth of cryptocurrency investments on behalf of Celsius from August 2020 to March 2021, said when the prices of digital assets such as Ethereum and Bitcoin soared. At the beginning of last year, he said that Celsius had begun to collapse.
At that point, Celsius’ customers sold highs and began withdrawing their holdings in order to make significant profits. However, it is said that Celsius did not have enough funds to cover these transactions and was forced to buy cryptocurrencies at a loss to return people’s assets. In an attempt to attract new customers to inject more cryptocurrencies into the platform, Celsius began offering double-digit interest rates.
“”[These] The funds were used to repay former depositors and creditors. Therefore, Celsius continued to market as a transparent, well-capitalized business, but it was actually a Ponzi scheme. ” [PDF] Against Celsius. It is said that Celsius could not pay the money to pay Stone due to lack of cash.
Therefore, Celsius has been accused of breach of contract and fraud. “Celsius has made virtually misleading statements and omissions calculated to convince plaintiffs that Celsius is a legitimate business with adequate security and disclosure of truth to its customers.” The proceedings alleged. Stone and Key Fibiz are reported to have lost millions of dollars to pay for their employment.
Stone and his KeyFi team managed Celsius’ funding from the newly created Ethereum wallet. We are said to have been granted permission to purchase NFTs using the money from that account as part of a prepaid contract. When he left in March, the account was taken over by Celsius CEO Alex Mashinsky. Alex Machineski then seems to have transferred the NFT to another wallet owned by his wife.
Celsius has taken out a loan to other coins, such as tether, to return the customer’s assets. ” Tether loanAlong with other Celsius deposits, has been used to hide the fact that Celsius is actually a balance sheet bankruptcy and has less money in the vault than it pays to depositors. “
Then in May, the so-called Stablecoin Terra Crashed, Confidence in the crypto market has weakened further and prices have continued to fall. After a month, Celsius suspended all withdrawals and remittances between accounts, blaming “extreme market conditions.”
“Celsius didn’t, so he took this drastic action (and yet ) I don’t have enough crypto assets to balance the obligations I have on my client. Just days before this announcement, on June 7, 2022, Celsius claimed that “we have a reserve to meet our obligations, as stipulated by our comprehensive liquidity risk management framework.” did. This turned out to be a lie. This lie was in line with Celsius’ statement to plaintiffs regarding its risk management. “
Register I asked Celsius for comment. ®