SINGAPORE, Jan 31 (Reuters) – A U.S. court-ordered examiner’s report released on Tuesday showed that the business model that cryptocurrency firm Celsius Network advertised and sold to its customers was not what it actually ran.
Celsius and its founder Alex Mashinsky (who is currently facing fraud charges in the U.S.) failed to “deliver” from the start on the promises it made around its native CEL token and other business activities, the report said .
It added that Celsius had a stablecoin deficit of $1 billion in assets between May 28, 2021, and filing for bankruptcy last year due to the use of customer deposits to purchase stablecoins.
Hoboken, N.J.-based Celsius filed for Chapter 11 protection from creditors in Manhattan last July after freezing customer withdrawals from its platform. It posted a deficit of $1.19 billion on its balance sheet.
Representatives for Celsius did not immediately respond to an emailed request for comment sent by US Night.
Crypto lenders such as Celsius have thrived during the COVID-19 pandemic, luring savers with high interest rates and easy access to loans that traditional banks rarely offer.
Many have broken down.
Similar to a bank, Celsius collects crypto deposits from retail customers and invests them in assets that amount to the wholesale crypto market, including “decentralized finance” or DeFi sites that use blockchain technology to operate outside the traditional financial sector. Provide services from loans to insurance.
U.S. Bankruptcy Judge Martin Glenn, who oversees the Chapter 11 case, appointed former prosecutor Shobapillai as an independent examiner in September.
She was tasked with investigating allegations by Celsius clients that the firm was operating as a Ponzi scheme and reporting on its handling of cryptocurrency deposits.
Reporting by Rae Wee, Additional reporting by Alun John; Editing by Clarence Fernandez and Louise Heavens
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