Celsius Was Operated in a Ponzi-Like Manner: Report

Celsius was pushing up the price of its CEL token by using customer funds, a new report has found. Even employees commented on how ponzi-like the scheme appeared.

A Ponzi in Many Ways

An independent examiner seems to have confirmed something crypto natives have suspected for months now.

In her court-ordered, mammoth 689-page report on Celsius, Shoba Pillay indicated that the defunct crypto lending company operated in a vastly different manner from the way it advertised itself—and that parts of the business were run in a ponzi-like manner.

According to Pillay, Celsius used customer funds to prop up the price of the company’s own token, CEL. Even Celsius employees—such as Coin Development Specialist Dean Tappen—described the strategy as “very ponzi-like.” The company would also sell CEL in private, over-the-counter transactions and buy back the same amount in public markets to raise prices. Pillay describes a number of other ways Celsius was market-making for its own token, including timed purchases and placing resting limit orders.

Meanwhile, former Celsius CEO Alex Mashinsky sold more than $68 million in CEL tokens from 2018 to 2022—this despite publicly stating during his AMAs (“Ask Mashinsky Anything,” as he called them) that he was not a seller. Celsius co-founder David Leon also cashed out almost $10 million, and former Celsius chief technology officer Nuke Goldstein dumped $2.8 million as well.

Celsius also used new customer deposits to fund customer withdrawals in the three days leading up to its freezing of customer withdrawals altogether. “If Celsius had not instituted the pause and the run on the bank continued, new customer deposits inevitably would have become the only liquid source of coins for Celsius to fund withdrawals,” stated Pillay. 

The report further claimed that Celsius had suffered over $800 million in unreported losses in 2021 from investments in Grayscale, KeyFi, Stakehound, and Equities First Holdings. 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.