Lawsuit Against Crypto Lending Platform Celsius Network – Know The Complete Truth
Written by: Delma Wilson
On Thursday, a former investment manager at Celsius Network filed a lawsuit against the cryptocurrency lender, alleging that it had frozen customer funds and had rigged the price of its own cryptocurrency token using customer deposits.
The latest industry data revealed that Celsius has acquired more than $20 billion in assets with an 18% interest rate to customers on their deposits. The founder Alex Mashinsky downplayed the concerns and claimed the business could generate high rates on its own.
Numerous Client Accounts are Frozen
As per the complaint, Celsius operated a Ponzi scheme to profit itself through “gross manipulation of customer deposits” and tricked plaintiff KeyFi Inc, run by former manager Jason Stone, into providing services worth millions of dollars while failing to pay for them.
The case was filed in Manhattan’s New York state court and asks for an itemized breakdown in compensation and civil penalties, while Celsius has not given any official statement on the lawsuit.
In response to Stone’s charges, Celsius decided on June 12 to halt withdrawals and transfers for its 1.7 million customers due to “intense” market conditions.
Later, the Hoboken, New Jersey-based business recruited consultants to discuss a potential debt restructure that would involve declaring bankruptcy.
While the cryptocurrency hedge fund went into liquidation late last month, the crypto lender Voyager Digital Ltd filed for bankruptcy protection this week.
In the midst of a credit crunch in the BTC markets
The accusations come at a time when the bitcoin markets are experiencing a credit crunch.
Unexpectedly, Celsius promised retail customers exaggerated returns of up to 19% annually.
However, Stone claimed that Celsius had trouble paying investors because it neglected to hedge its bets, leading to “severe” losses when the value of several coins changed.
Going deep into the pool, he said that Celsius created a $100 million to $200 million hole in its accounts that it “could not completely explain or rectify” by recording some deposits on a U.S. dollar basis even though clients made payments using bitcoin or other tokens.
The case filed on Thursday alleges that Stone produced $838 million in profit for Celsius and KeyFi before expenses and overhead from August 2020 to March 2021 while mostly operating without a written agreement, with KeyFi being entitled to 20% of net profit.
Stone asserts he ended the agreement in March 2021 after it became apparent that the hedging problems “may be financially devastating” for Celsius and harm KeyFi’s reputation, but Celsius has refused to accept his resignation.
STATE OF NEW JERSEY
BUREAU OF SECURITIES
P.O. Box 47029 Newark,
New Jersey 07101 ( 973 ) 504-3600
IN THE MATTER OF: Celsius Network, LLC, Respondent.
Summary Case and Desist Oder
Pursuant to the authority granted to Christopher W. Gerold, Chief of the New Jersey Bureau of Securities ( ” Bureau Chief ” ), under the Uniform Securities Law ( 1997 ) , N.J.S.A. 49 : 3 47 to -89 ( ” Securities Law ” ) and certain regulations thereunder, and based upon documents and information obtained during the investigation by the New Jersey Bureau of Securities ( ” Bureau ” ), the Bureau Chief hereby finds that there is good cause and it is in the public interest to enter this Summary Cease and Desist Order ( ” Order ” ) against Celsius Network, LLC.
The Bureau Chief makes the following findings of fact and conclusions of law :
FINDINGS OF FACT
- Celsius Network, LLC ( ” Celsius ” ) is a financial services company that generates revenue through cryptocurrency trading, lending, and borrowing, as well as by engaging in propriety trading. Since June 2018, Celsius has been, at least in part, funding its lending operations and proprietary trading through the sale of unregistered securities in the form of cryptocurrency interest – earning accounts. Celsius refers to these unregistered securities as its ” Earn Rewards ” 1 . account…..
You can see the complete text at the following link.
Free legal advice;
The State of New Jersey Bureau of Securities has discovered numerous irregularities in the operation of Celsius Network, LLC (“Celsius”) financial services company. Based on their analysis and comparative law, we believe that there is an element of criminal responsibility in the actions of Celsius.
We draw this conclusion from the fact that the company did not manage funds from investors transparently and in accordance with the law, nor did it abide by rigid financial regulations in its operations. Failing to disclose facts about the regularity and sustainability of its operations and business model Celsius Network LLC misled the investors. Another aspect of potential criminal liability is the fact that Celisus Network LLC failed to abide by its internal regulation and payout of interests on the initial investments.
It is now clear that Celsius Netwrok LLC is insolvent and has filed for Chapter 11 Bankruptcy in New York, depriving investors of their assets in the process.
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