Former Celsius Employee Talks About Firm’s Issues That Led To Bankruptcy
- Former Celsius employee talked about the reasons why crypto lender Celsius went brankrupt
- He stated that past disorganization, poor risk management, and alleged market manipulation were the reason for bankruptcy
Problems at the New Jersey-based crypto lender Celsius Network have been plagued way before the company publicly declared its troubles and filed for bankruptcy. A report by CNBC reveals that the crypto lending company witnessed a series of internal missteps leading to the recent disaster, citing former employees and internal documents.
The report cited several employees who talked about Celsius Network’s past disorganization, poor risk management, and alleged market manipulation. Timothy Cradle, the company’s former director of financial crimes compliance, said that the biggest problem was the failure of risk management.
“I think Celsius had a good idea, they were providing a service that people really needed, but they weren’t managing risk very well.”
He added
Notably, on June 12, the troubled company announced the suspension of user withdrawals on the platform, citing “extreme market conditions.” The most important factor that attracted the users was its 17% yield promise on crypto deposits.
However, according to internal documents, Celsius would plan to earn even higher yields by lending user funds to hedge funds along with investing in other high-risk crypto projects. The company would later split these earnings with its customers without letting them the risky strategy behind the profits. However, when the crypto market collapsed, the model crashed down, causing the company to freeze assets and file for bankruptcy.
Cradle said that despite him being a part of a three-person compliance team in the past, he failed to apply international finance laws to Celsius Network’s business due to resource limitations.
“Compliance was a cost center—basically, we were sucking out money and not bringing any back in. They didn’t want to spend on compliance.”
He stated
Another internal company document obtained by CNBC matched Cradle’s claims. The document said, “there is not adequate compliance staff for the number of users on Celsius’s platform as there are only three full-time individuals” for assessing fraudulent crypto platforms.
Talking about the “CEL” token, the former executives said the company was “pumping up the CEL token” and “actively trading and increasing the price of the token.” He added that Cleisus was “absolutely” trading the CEL token “to manipulate the price.”
Along with being the largest holder of the CEL token, the data by blockchain data firm Arkham reveals that Celsius was also a buyer.
Early in 2020, the value of the token began to rise, reaching a peak of around $8 the following year. In July, it was trading for less than $1.
Another former employee of Celsius, who wished to remain unnamed, claimed that while CEO Alex Mashinsky persuaded average investors to buy CEL, he was secretly selling it without any public disclosures. As the volume was quite low, the CEL price would see significant fluctuations.
Notably, a recent lawsuit brought by former investment manager Jason Stone also echoed similar allegations against the company.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
