Celsius Network is suspected of creating a Ponzi scheme. The investigation has been opened

A court-appointed examiner, jointly with a creditors’ committee, will verify exactly how the crypto lending platform’s client funds were used

02.11.2022 - 10:00

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What’s new? A judge in the bankruptcy case of crypto lending platform Celsius has ordered an investigation into the company’s activities to see if it was using a Ponzi scheme. A court-appointed examiner, along with a committee of Celsius creditors, will select the head of an investigation, which should determine whether the platform used money from new depositors to meet financial obligations to earlier ones, the Wall Street Journal reports.

News on the WSJ website

What else is known about the investigation? The creditors committee’s lawyer, Greg Pesce, said that there are signs of a Ponzi scheme in the activities of Celsius, adding that there is not enough information at this time to make an unequivocal statement. The court-appointed examiner Shoba Pillay will analyze Celsius’ marketing strategy, including its statements to attract new clients, as well as the platform’s transactions with its native token CEL.

The court appointed the expert as an independent third party, despite the creditor committee’s displeasure about having to pay for her work and concerns that it might delay the consideration of the case. Thus, the judge noted that Celsius’ obstruction of the expert’s investigation could prolong the process because of the need to seek information from the regulators.

Celsius Network situation. On June 13, Celsius froze client funds because of tough market conditions and declared bankruptcy a month later. In July, KeyFi accused Celsius of running a Ponzi scheme, as well as failing to pay interest on the profits within the partnership. Later, a group of investors also accused the platform of using a fraudulent scheme.

For what led the company to collapse, read GetBlock Magazine’s exclusive feature.

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