Celsius Network is currently in bankruptcy and it turns out that this crypto lending platform was operating as a Ponzi scheme.
Indeed, saddled with potentially billions of dollars in debt, crypto lending platform Celsius Network (CEL) was actually operating as a Ponzi scheme, reveals the damning 700-page report turned in by independent examiner Shoba Pillay.
As a reminder, since 2017, Celsius was one of the leading platforms for lending or “staking” cryptocurrencies. By depositing their crypto-currencies on the platform, customers could earn up to 18% interest. However, after its collapse, more and more voices questioned whether it was a Ponzi scheme, the fraudulent system of funding the “interest” of early investors with the bets of new entrants.
The investigation and review of accounts by Shoba Pillay, chosen as an independent examiner by U.S. Bankruptcy Judge Martin Glenn, thus report that Celsius used customer assets to purchase crypto tokens to cover the debts of other customers, “very similar to Ponzi,” Pillay writes.
It’s good to know that a Ponzi scheme scam involves paying for customer investments primarily with funds provided by new entrants. If the scam is not discovered beforehand, the fraud comes to light as the scheme collapses.
The report also states that the failed crypto lending platform used customer funds in Bitcoin (BTC) and Ethereum (ETH) to buy its own native CEL token to artificially boost the CEL price.
This report therefore highlights the fact that Celsius Network was likely already in trouble in 2021, well before the company’s dramatic collapse in 2022.
In addition, the review of Celsius’ financials indicates that capital raised by the platform from investors was used to prop up the CEL cryptocurrency price.