Cryptocurrency lending platform Celsius (CEL) left thousands of its users as creditors after pausing withdrawals and subsequently going bankrupt in June 2022. A new document from the investigation alleges that the company is illegally selling cryptocurrencies deposited by new users.
Celsius sells cryptocurrency funds deposited by new users
According to the court document by bankruptcy investigator Shoba Pillay, Celsius was selling Bitcoin (BTC) and Ethereum (ETH) that customers had deposited to buy CEL. “Celsius was unable to generate sufficient returns from cryptocurrency distributions to fully fund CEL buybacks. As a result, CEL started using customer-deposited Bitcoin (BTC) and Ether (ETH) to fund purchases.”
However, Celsius cannot be scrutinized as not having the necessary cryptocurrencies to meet its client obligations, as it lacks adequate reporting systems to track client funds on a cryptocurrency basis. This is why Celsius was caught off guard when a deficit in BTC and ETH (which it used to fund CEL buybacks) was discovered in early 2021.
According to the report, as BTC and ETH prices rose during that period, so did the amount of dollars it cost Celsius to obtain the required number of BTC and ETH. The company then used the client’s stablecoins to buy Bitcoin and ETH for $300 million in May.
Celsius’s illicit transactions exposed by Terra’s collapse
The dramatic collapse of the Terra ecosystem in May dealt a hard blow to the crypto market and wiped out more than $200 billion from the market. Following this event, a long series of bankruptcies occurred that included companies such as Celsuis and 3AC. The court document, prepared by bankruptcy investigator Shoba Pillay, shows that Celsuis’ corrupt transactions came to light during the May crash:
When customers started withdrawing BTC and ETH from Celsius in May and June 2022, Celsius had to loosen its debts to buy back the BTC and ETH it had committed. As a result, the stablecoin deficit has been replaced by the BTC and ETH deficit.
cryptocoin.com Since the collapse of FTX, which we quoted as the FTX, there has been speculation that some of these currently bankrupt institutions in the crypto market are selling Bitcoin and ETH to support their own tokens or invest in other assets. One piece of data that confirms this is that FTX had a very small amount of Bitcoin or Ethereum at the time of bankruptcy. The sales likely came from companies that wanted to support their own tokens.
The collapse of the cryptocurrency market deepened with funds sold by companies as a ‘last resort’
This bankruptcy report at least confirms that in the case of Celsius, which has a $1 billion deficit. Some argue that this practice puts pressure on the Bitcoin price and may explain why it hasn’t peaked. Since these assets are no longer operating, Bitcoin has escaped much of the pressure.
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