Celsius, the now-defunct crypto lending Ponzi scheme that came to a crashing halt in June of 2022, is currently working its way out of bankruptcy.

Its plan is to IPO as Ionic Digital by 2025 but those plans look to be on hold following the announcement that the CEO has resigned, its board of directors has been reshuffled, and the auditor has quit.

All of this comes on the heels of a contract with cryptocurrency mining company Hut8 to expand Bitcoin mining operations for the company that’s supposed to go on for the next four years.

CEO is ‘pursuing new opportunities’

In an attempt at a quiet exit as executive leader of the company, CEO Matt Prusak stated, “After an incredible journey, I’ve decided to pursue new opportunities as my initial term as CEO of Ionic Digital concludes in mid-August.”

Prusak stated he’s “immensely proud of what [Ionic Digital has] accomplished and [is] confident in the company’s bright future.”

It’s unclear what it accomplished outside of signing a contract with Hut8, a bitcoin miner that has seen its stock price on the Toronto stock exchange tumble from all-time highs of ~CA$96 in 2021 to ~CA$17 today.

Read more: Celsius has finally shut down its phone app

Meanwhile, two members of the board of directors, Asher Genot who is CEO of Hut8, and Max Holmes, a professor at NYU, have been replaced by Mac Gardner, chairman of the board of Spirit Airlines, and Scott N. Flanders, the former CEO of Playboy. It’s uncertain whether or not their previous experience will help Ionic Digital reach its ultimate goal of going public next year.

Ionic Digital’s auditor, RSM US, stated that it would not be able to continue serving as the company’s auditor due to its strategic decision to no longer audit publicly traded digital asset mining companies. RSM says its decision “was not a result of any disagreements with the company on accounting principles, practices, financial statement disclosure, or auditing scope or procedure.”

These changes occurring simultaneously doesn’t bode well for the new bitcoin mining company, but Ionic Digital is insisting that it’s still pursuing the same goals as before and hasn’t changed the timeline for going public — at least not yet.

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Correction 13:30 UTC, Aug 13: Corrected piece to clarify that RSM has ceased audits of publicly traded digital asset mining companies, not, as originally reported, all companies in the crypto sector.

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As Tether has grown exponentially over the years, it has also altered the composition of what provides backing for every one of its tokens. In some quarters, this has been perceived as positive, particularly the fact that the company has moved away from commercial paper of unknown quality into US treasuries and repo markets.

However, Tether also has a variety of ‘other investments’ — many of which have been shared publicly on its Crunchbase profile.

Celsius Network

Tether’s first investment was in the now-defunct crypto lending platform Celsius. Run by Alex Mashinsky and his cronies, the lending company declared bankruptcy after collapsing under the weight of its own poorly enacted market manipulation and fraud.

Tether made an announcement in 2022 that stated, “Tether’s portfolio does include an investment in Celsius,” but added that the investment was actually for shareholder equity and that there was “no correlation between this investment and Tether’s own reserves or stability.”

Tether also revealed a loan provided to Celsius in the announcement. Celsius raised nearly $1 billion in funding before it collapsed and Tether is listed as one of only a handful of lead investors.

Exordium

Exordium is the web3 gaming company created by the former CSO of Blockstream, Samson Mow. Exordium’s investors include Disrupt Ventures — a fellow investor in Celsius Network. Their only IP is a video game called Infinite Fleet, which is a Star Citizen-esque game that incorporates its own token. The company has only raised $5.4 million so the amount Tether put into the company is minimal, even as lead investor.

Bitrefill

Bitrefill is an early website devoted to selling gift cards and other products for cryptocurrency. Investors include Litecoin creator Charlie Lee, Tim Draper’s Draper Associates, and Fulgur Ventures. Similar to Exordium, Bitrefill has only raised $9.5 million, a minuscule amount from Tether’s reserves.

NAKA

NAKA is a financial services company almost exclusively working with individuals and organizations involved with crypto. The CEO and co-founder of NAKA is Dejan Roljic, a Slovenian who’s been involved with crypto for many years now — including a 2018 ICO called Eligma, which raised $7.2 million.

While Eligma had bold goals of merchant adoption, AI-driven item discovery, and other absurd claims, it appears to simply do software development work now. Meanwhile, NAKA has raised nearly $50 million, with over $20 million of that coming from Tether and Bitfinex.

Volcano Energy

With only one investor — Tether — Volcano Energy, an El Salvadoran geothermal energy company with support from the Bukele government, looks to have raised approximately $250 million from Tether. This makes it one of Tether’s larger investments, which makes a lot of sense considering its close ties to Nayib Bukele and the Salvadoran government.

The company aims to take advantage of the volcanic hotspots in El Salvador to mine bitcoin, with some miners beginning to run in October of last year — there have been no real updates since. Laughably, the CEO, CSO, and chairman (well-known Bitcoin maximalist and former Russian TV star Max Keiser) have no experience in the energy industry — though help from numerous international conglomerates, including ChinaPower, will likely help with that.

In a reply to Ethereum World News, a spokesperson for Tether apparently claimed that the company’s reserves wouldn’t be used for this investment, but how that would be possible is unclear.

Read more: Explained: El Salvador’s contentious bitcoin-backed Volcano Bonds

Northern Data Group

Northern Data is a bitcoin mining company that has also pivoted to trying to use its energy contracts and data centers for artificial intelligence. It has been reported that Tether owns the majority of this firm. Former executives have alleged the firm engaged in securities fraud and tax evasion.

Northern Data is reportedly considering an IPO of its AI unit, though Northern Data stated it could neither confirm or deny those rumors.

Read more: Tether-owned Northern Data accused of fraud by former execs

Academy of Digital Industries

A Georgian education company that received almost no money from Tether, with the stablecoin only investing $40,000 in it according to Crunchbase. Tether appears to have used this investment as more of a PR coup than anything else: the minimal investment allowed it to post an announcement stating it was supporting blockchain and cryptocurrency education globally, while also advertising ‘Mastering the Blockchain’ courses that were being held at the conference it co-hosts in Lugano.

Tickets to the conference range in price from $170 to $1,700.

Oobit

A Lithuanian-based company that was founded by Israelis, Oobit raised $3 million in 2020, followed by a $25 million raise in February of this year. Investors in the company include big names in the crypto industry, from Tether to Solana co-founder Anatoly Yakovenko and 468 Capital.

The company is looking to make crypto easier for both consumers and merchants to use by converting it to cash as soon as it’s transferred to a merchant. This is likely something that Tether plans to help with and benefit from.

Read more: Is Tether becoming Bitcoin’s most influential miner?

Satellogic

Satellogic is a Caribbean-Uruguayan company that has gotten into the satellite launch business. Between 2013 and 2020, launches for the company almost exclusively took place in China and Russia, but since then, the company has been working with SpaceX to launch from the US.

Additionally, Satellogic laid off workers last year, lowered expectations around the number of forthcoming launches, and sought out new investors because of financial difficulties. After this announcement, Tether came to the rescue by allowing the company to essentially borrow money.

The company currently trades on the Nasdaq exchange for around a dollar.

CityPay.io

CityPay.io is a Georgian company specializing in crypto payments. Of the $2.8 million that it has raised, $2.1 million has come from Tether.

The drive to bring more users to Tether in countries with higher poverty and unemployment than Western nations has likely led to it prioritizing investment in CityPay.io. Georgia has not seen an unemployment rate below 10% since the early ’90s and its poverty rate hovers persistently around 15-20%.

Bitdeer Technologies Group

Run by (in)famous early bitcoin miner Jihan Wu, who came on board as CEO of the company in January of this year, Bitdeer Technologies Group is a NASDAQ-listed cryptocurrency mining group.

Tether invested an impressive $100 million into the company a few months ago, pouring many times more value into it than it had ever received before. Unfortunately, since that raise, the publicly traded company has remained incredibly volatile and its stock has traded anywhere between $14 and $3.20 over the past year.

XREX

XREX identifies as ‘a blockchain-enabled financial institution’ that offers ‘enterprise-grade banking to SMBs and novice-friendly financial services to individuals globally.’ Tether invested $18.75 million in the firm, with the announcement stating it hopes this partnership will “facilitate USDT-based cross-border payments in emerging markets.”

Further, the announcement highlights that XREX can apparently lead to new “solutions to detect and prevent illicit use of stablecoins.”

In sum, these investments show how Tether has expanded its role in the ecosystem, funding a variety of different projects across many different verticals, all while receiving fewer audits than FTX.

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While Celsius went bankrupt in July of 2022, one part of the company, for some reason, remained functional and available for download: the Celsius phone app.

However, as of February 29, that has finally changed and the mobile app is officially shutting down.

According to the Celsius website, the plan was already announced way ahead of time and can be found in its ‘Plan of Reorganization.’ The application is already no longer available for download on the Apple App store and the company has recommended that users “remov[e] the app from [their] device.”

Read more: The Mashinskys used Celsius to promote Strong blockchain — and it still failed

Small hurdle in a long march

The shutting down of the mobile app is a small bump in the road for the newly-out-of-bankruptcy Celsius, which also has plans to launch a cryptocurrency mining business known as Ionic Digital, LLC.

The entity is hoping to IPO at some point in the next few months — a risky business venture for many of the creditors who have been forced to accept shares of the new company due to its restructuring as a mining business. These creditors will hope that the operation will fare better than many others.

For comparison, bitcoin has outperformed every major publicly traded bitcoin mining stock over the past five years, including Riot, Marathon Digital, and CleanSpark. Executive leadership at the newly formed Ionic Digital has suggested an IPO price of $20 a share, but liquidity and how many creditors will simply decide to sell their shares on day one remains to be seen.

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Several bankrupt cryptocurrency firms, including Alameda Research, Blockfolio, Celsius, and Voyager, previously received Payroll Protection Program (PPP) loans through the pandemic-era program.

The Payroll Protection Program was a pandemic-era business stimulus program that offered loans to businesses that maintained employment of its employees through the beginning of the pandemic; these loans could then be forgiven. The program was plagued by fraud, with the Small Business Administration inspector general identifying $78.1 billion in potentially fraudulent loans.

Sam Bankman-Fried’s failed trading firm, Alameda Research, received a $370,518 loan from Signature Bank and successfully paid back the loan. Bankman-Fried was subsequently convicted of multiple felony counts related to fraud conducted at Alameda Research.

Read more: Scammers pose as bankruptcy firm to drain Celsius users’ wallets

Blockfolio, a firm that would end up as part of the Bankman-Fried wreckage, also received a PPP loan of $458,211 from Wells Fargo. The loan was forgiven. 

Cryptocurrency lenders also received PPP loans. Celsius Networks received a $281,502 loan from Signature Bank that was also waved away. Alex Mashinsky, the former chief of Celsius, has been charged with multiple counts of fraud related to Celsius. Voyager Digital received a $619,400 PPP loan from Dime Community Bank, but unlike Celsius, its loan was repaid. 

PPP loans were an entirely legal program, and there is no evidence (beyond criminal prosecutions directed at executives at several of these firms) to suggest that there was anything untoward in the process of receiving these loans.

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Customers of defunct crypto lender Celsius are reportedly being targeted by scammers impersonating the firm’s bankruptcy claim agent Stretto.

As reported by Bleeping Computer, Celsius filed for bankruptcy last year, stopping withdrawals from user accounts. Desperate customers have subsequently filed claims against the company in attempts to claw back at least some of their funds.

Now, they’re receiving phishing emails claiming to be from ‘Stretto Corporate Restructing’ that include a link to Seychelles-hosted phishing site claims-stretto[.]com.

Once a victim connects their wallet, the site will attempt to drain all assets and NFTs stored in it by disguising the transaction as a deposit.

Read more: Alex Mashinsky hints Do Kwon and SBF caused Celsius bankruptcy

According to Bleeping Computer, the attackers are likely using older contact lists previously stolen through hacked cryptocurrency marketing accounts. This is evidenced by the fact that a number of people have reported receiving the emails despite having never had any dealings with Celsius or filed as a creditor.

What makes this attack particularly dangerous is the fact that the emails pass Sender Policy Framework (SPF) checks, which determine if an email comes from a valid email server for the sending domain.

Celsius creditors who receive one of these emails are advised to ignore it and instead check for updates on the case at https://cases.stretto.com/celsius/. The legitimate site for Celsius claims is located at https://cases.stretto.com/celsius/claims/.

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Law firms, consultants, and analysts raked in more than $700 million following the implosions of crypto firms FTX, Voyager Digital, Genesis Global, Celsius Network, and BlockFi, reports the New York Times (NYT).

Analysts reportedly combed through more than 5,000 court records and discovered that in the past year, two major law firms, Sullivan & Cromwell (which is handling FTX’s bankruptcy) and Kirkland & Ellis (which is dealing with three collapsed crypto firms) made $110 million and $101 million in fees respectively.

The two firms also charged $500,000 and $2.5 million in expenses.

The rapidly increasing fees may be music to the ears of bankruptcy specialists but have drawn criticism from creditors affected by the firms’ collapses. Understandable, given that money paid to lawyers and other experts comes out of any potential pool of funds to be returned to them.

The fees are “exorbitant and ridiculous,” said 19-year-old investor Daniel Frishberg (via NYT).

Frishberg, who lost $3,000 when Celsius went under last year added, “At every hearing, they have an army of people there, and most of them don’t need to be there. You don’t need 20 people taking notes.”

FTX creditors have also raised concerns about Sullivan & Cromwell’s hourly rates, which touch nearly $600 for paralegals and over $2,000 for partners.

Read more: Mashinsky charged by DoJ, CFTC, SEC, and FTC year on from Celsius bankruptcy

Legal firms, for their part, claim that the high fees reflect the importance of the work they’re doing to return funds to investors. Indeed, Sullivan & Cromwell claims to have recovered $7 billion in assets so far.

However, in a statement, an FTX spokesman cautioned that the lack of explicit crypto laws and regulations make the whole process more complicated and, inevitably, more expensive.

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Alex Mashinsky, the former Celsius Network CEO, has reportedly been arrested and indicted today by the Department of Justice (DoJ) for wire fraud, market manipulation, commodities fraud, and securities fraud. Former Celsius chief revenue officer Roni Cohen-Pavon was indicted alongside Mashinsky.

Mashinsky and Celsius Network were also sued today by the Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC). This comes exactly one year after the company filed for bankruptcy. 

The criminal indictment claims that Mashinsky and Cohen-Pavon engaged in a scheme to raise the price of CEL, the token issued by Celsius. It’s alleged that Mashinsky misrepresented the solvency, safety, and success of Celsius Network to investors and that both Mashinsky and Cohen-Pavon used hundreds of millions of dollars to purchase CEL in order to artificially inflate the price. This allowed them to cash out their own holdings and personally reap millions in proceeds.

Read more: Celsius to sell crypto platform amid Mashinsky court battle

According to the indictment, Mashinsky made approximately $42 million from his sales, and Cohen-Pavon made around $3.6 million. Mashinsky, at one point, stated in an internal email describing the effort to “protect” the CEL price that it’s “a win-win scenario, the only we loose [sic] is if CEL price drops a lot and people get nervous and keep selling. We can protect against this scenario.”

The indictment highlights several of Mashinsky’s public misrepresentations, including how he regularly misrepresented how much was made from the CEL ICO. He claimed that it sold out and made over $50 million, however, Celsius apparently only raised $32 million and then entered into a “token sale agreement” with Mashinsky to purchase the remaining CEL through an entity he controlled. Payment was never remitted.

Eventually, this “token sale agreement” was converted into a “loan agreement,” which led to other executives resigning because of the conflicts in the transaction.

Eventually, this was converted into a new, superseding “loan agreement,” which required Mashinsky to post some of his Celsius equity. Mashinsky allegedly failed to repay the loan, leading to Celsius taking these originally unsold CEL tokens back into the Celsius treasury. This entire series of transactions occurred with no disclosure to investors in CEL that the stated sale amount was inaccurate.

Indictment claims Mashinskly fudged Celsius’s books

Mashinsky also allegedly made regular misrepresentations about Celsius’s financials, including profitability, sustainability, solvency, trading strategy, insurance, collateralization of loans, counterparty defaults, and losses of assets. The indictment alleges that the executives were aware in 2021 of a “hole” in the books that was caused by using Bitcoin deposited by customers to purchase CEL with the goal of increasing the price of CEL.

Mashinsky also repeatedly represented in public that Celsius didn’t make directional trades; the indictment alleges it explicitly had accounts labeled “Directional1” and “Directional2” and that, at times, Mashinsky personally took over the trading desk, overriding concerns from the firm’s risk department in a series of trades that lost it tens of millions of dollars.

This led to one employee messaging another to ask, “At what point do we seek outside intervention to get the thing under control?”

Read more: Independent examiner finds Celsius ticks every Ponzi box

Similarly, Mashinsky represented publicly and in interviews that Celsius only had over-collateralized loans. The indictment alleges that unsecured loans made up nearly 40% of the company’s’ portfolio. One executive warned Mashinsky about these statements, saying, “This is not true, and we cannot say that.”

The indictment further alleges that in the weeks leading up to Celsius’s closing withdrawals, Mashinsky personally withdrew the lion’s share of assets he had on the platform while stating publicly, “We’re in it together.”

Celsius Network has entered into a non-prosecution agreement with the DoJ surrounding the allegations in the indictment. 

The FTC case names Mashinsky as well as former chief technology officer Hanoch ‘Nuke’ Goldstein, co-founder Shlomi Daniel Leon, and other Celsius entities in a lawsuit that alleges deception in marketing and unfair misappropriation of assets.

Meanwhile, the SEC case names Mashinsky and Celsius in a lawsuit that alleges securities fraud and the unauthorized offer and sale of securities. The SEC specifically names both CEL and the Earn program as securities in the suit.

The CFTC case names Mashinsky and Celsius in a lawsuit that alleges commodities fraud, commodity pool fraud, failure to register as a commodity pool, and failure to provide required disclosure.

These allegations come one year after Celsius plunged into bankruptcy after its apparent insolvency grew too large to deny. The firm was once a well-respected crypto company, with industry-leading stablecoin Tether leading a Series A investment round and offering Celsius a series of loans. One former Celsius trader, Jason Stone, previously alleged that these loans were meant to “cover up” the fact that Celsius was already insolvent.

The New York Attorney General is also suing Mashinsky.

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Celsius founder Alex Mashinsky has filed an entertaining motion to dismiss New York Attorney General (NYAG) Letitia James’ lawsuit. NYAG is suing Mashinsky for operating an unregistered securities and commodities broker-dealer and defrauding investors out of hundreds of millions of dollars. Over 26,300 New York residents used Celsius Network.

Mashinsky, in an emotionally-charged retort, clapped back against almost all of her claims, claiming NYAG “parrots misinformation” with “baseless conclusions.” Instead of accepting responsibility for one of the largest frauds in crypto history, Mashinsky asserts that “circumstances outside of his (and Celsius’s) control led to a liquidity squeeze that resulted in Celsius pausing withdrawals and filing for bankruptcy.”

NYAG alleges Mashinsky misrepresented Celsius Network’s financial health and downplayed its exposure to FTX and Do Kwon’s Terra LUNA. NYAG’s case cites Mashinsky’s positive statements about Celsius’ ostensibly prudent, low-risk approach to finance. 

In reality, independent examiner Shoba Pillay detailed Celsius’ myriad similarities to a Ponzi scheme in a 476-page report produced for the US Bankruptcy Court for the Southern District of New York.

Mashinsky claims Celsius Network collapsed due to circumstances beyond his control. Celsius had invested heavily in projects by Do Kwon and Sam Bankman-Fried which, according to Mashinsky’s motion to dismiss, were impossible to identify as fraudulent prior to their collapse.

Terra USD (UST) experienced a spectacular meltdown in May 2022. It also used underhanded tactics such as depositing customers’ funds to Do Kwon’s Anchor Protocol, which the Terra USD meltdown wiped out.

Alex Mashinsky says Celsius was not a Ponzi scheme

Mashinsky’s motion to dismiss also claims the NYAG’s complaint parroted inaccurate information that had spread online and misrepresented its business model. He claims his descriptions of Celsius Network’s safety practices were mere “puffery,” and never meant to be taken seriously.

NYAG disagrees, citing the CEO’s statements as information on which a reasonable investor would rely when making an investment decision.

Read more: Celsius to sell crypto platform amid Mashinsky court battle

“Instead of acknowledging that Celsius’s eventual downfall was caused by a series of calamitous, external events, the NYAG pins all resulting losses on the alleged misstatements of Mashinsky,” he bemoaned.

Furthermore, Mashinsky says the NYAG failed to list any securities or commodities on the Celsius Network’s platform in her complaint. At least 40 state securities regulators investigated Celsius for violations. New Jersey and several additional state regulators have accused the company of offering unregistered securities.

Mashinsky also claims that Celsius Network was never subject to New York’s Martin Act, passed by legislators to deter fraud.

New York Attorney General Letitia James alleges that fraud played a major role in Celsius Network’s collapse. Founder Alex Mashinsky denies most responsibility. Overall, he claims he is a victim of circumstances beyond his control. He blames NYAG for taking his verbal statements out of context. Mashinsky has filed a motion to dismiss the lawsuit against him in Manhattan.

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Now-bankrupt Ponzi scheme Celsius Network has reached a deal with NovaWulf Digital Management LP to sell its crypto platform, in an ongoing bid to refund customers.

Celsius must still seek the approval of bankruptcy court, as well as the blessing of the majority of its customers, before the deal can go through. If all goes to plan, users can expect a share of their trapped crypto on the platform to be returned in bitcoin and ether.

Celsius currently has a $1.2 billion hole in its balance sheet. It’s seeking to recover hundreds of millions it claims to have lost at the hands of its founder and former chief exec, Alex Mashinsky. Celsius and its creditors have filed initial court documents against Mashinsky, alleging he mismanaged the firm, inflated native token CEL for personal gain, and made “negligent” investments before it went bankrupt in July.

Read more: FTX and Tether were closer to Celsius than anyone realized

The lengthy legal document cites billions transferred to DeFi platform KeyFi — partly owned by Mashinsky — for speculative investments. Celsius claims it lost $200 million from that move. The company also transferred $12 million to AM Ventures and $5 million to Koala LLP, two entities controlled and owned by Mashinsky.

Additionally, creditors allege that $2.8 million was transferred fraudulently by Mashinsky into his own wallet in May.

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An independent investigation has determined that now-bankrupt crypto lender Celsius Network was a Ponzi scheme by using client funds to buy up its native token and inflate price.

Since September, former prosecutor Shoba Pillay has examined claims that the crypto lender was misappropriating funds and defrauding investors. Pillay, a partner at law firm Jenner & Block, was appointed as an independent examiner by US bankruptcy judge Martin Glenn, who oversees Celsius’ chapter 11 bankruptcy case.

The executive summary of Pillay’s 689-page report states that Celsius’ promises of “trust,” “transparency,” and “financial freedom” were a complete lie.

“Behind the scenes, Celsius conducted its business in a starkly different manner than how it marketed itself to its customers in every key respect,” the report concluded.

34 people were interviewed as part of the investigation, including Celsius’ former chief exec and founder Alex Mashinsky, current and past employees, customers, and business partners.

Report says Celsius misused millions of client funds in Ponzi scheme

Since the middle of March 2020, Celsius has been secretly timing its purchases in order to prop up the price of CEL significantly, the report said. By June 2021, CEL’s price “increased by 14,751%.”

Celsius’ inner circle made millions in profits from their hefty share of tokens soaring in value. Chief exec and founder Alex Mashinsky has reportedly sold at least 25 million CEL tokens since 2018, worth at minimum $68.7 million — despite repeatedly denying his dumps to the public.

Read more: The many misrepresentations of Alex Mashinsky

To keep Celsius’ token value stable during major sales by early investors, Celsius “often increased the size of its resting orders to buy all of the CEL that [they] were selling.” All the while, employees were aware and increasingly urging executives to adopt proper procedures.

“We are using users USDC to pay for employees worthless CEL… All because the company is the one inflating the price to get the valuations to be able to sell back to the company,” one employee was quoted as saying in Celsius’ Slack channel.

• Celsius spent at least $558 million buying its own token, the newly published report revealed.
• Since 2018, Celsius reportedly transferred at least 223 million CEL from the secondary markets to its own wallets — more than the 203 million CEL released in its ICO.
• Basically, Celsius bought every CEL token ever created “at least one time and in some instances, twice.”

Celsius couldn’t afford to keep buying back all of its own sales — so it decided to use customer deposited bitcoin and ether to pay for it instead, the report said. Only, the company failed to keep track of how much it was stealing from whom. In 2021, it found itself missing a bunch of bitcoin and ether that it suddenly needed to buy in order to keep up with customer withdrawals — right when the price of bitcoin and ether was soaring.

It allegedly decided to use client deposits to buy approximately $300 million in stablecoins to correct this shortfall — a band-aid on a leaking ship.

Read more: Investigation finds Celsius ‘Custody’ was ploy to remain relevant

“As a result, Celsius was left with a hole in its balance sheet of stablecoins rather than BTC and ETH,” the independent report stated. “That hole continued to grow as a result of Celsius’ continued buybacks of CEL and the significant losses Celsius suffered on some of its deployments in 2021.”

Celsius owes millions in bills and taxes

The report highlighted how Celsius executives exacerbated mounting liquidity issues by refusing to lower ridiculously high reward rates, turning to high-risk investments to increase yield, and accepting FTX’s own propped-up token as collateral.

Indeed, Celsius enjoyed close ties to other controversial crypto projects Tether and FTX. Pillay stated in the report that certain borrowers, including Tether, Alameda Research, and Three Arrows Capital enjoyed limits sometimes twice or three times greater than standard. At one point, Tether’s exposure grew to $2 billion and was deemed an “existential risk” internally.

Celsius was eventually forced to pause customer withdrawals in June to avoid insolvency. Had it not done so, “new customer deposits inevitably would have become the only liquid source of coins for Celsius to fund withdrawals,” Pillay’s report stated.

For the most part, Celsius had enough remaining reserves to satisfy the remaining outstanding withdrawals — but occasionally, the firm did indeed “directly use new customer deposits to fund customer withdrawal requests.”

Investigators further uncovered almost $14 million in unpaid utility bills in its mining arm, Celsius Mining, as well as “significant tax compliance deficiencies.” A suspected $23.1 million in use taxes remains outstanding while $3.7 million has been reserved for “potential VAT liability.”

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