SINGAPORE/LONDON, Jan. 31 (Reuters) – Crypto lender Celsius Network made use of investor funds and user deposits to back its own token, while two of its founders earned hundreds of thousands of {dollars} from token sales. This was stated in a Tuesday statement based on the US court-ordered examination report.

Crypto lenders like Celsius have flourished during the COVID-19 pandemic, luring in investors with high interest rates on cryptocurrency deposits. The New Jersey-based firm filed for Chapter 11 bankruptcy in the United States in July after freezing user withdrawals.

US bankruptcy judge Martin Glenn, who oversees the Chapter 11 proceedings, appointed former prosecutor Shoba Pillay as an independent examiner in September.

The examiner looked into allegations that Celsius was a Ponzi scheme, as well as its dealings with cryptocurrency deposits.

The examiner’s report did not conclude that Celsius was a Ponzi scheme, but did not provide evidence that would lead Judge Glenn to make that determination.

Celsius did not generate enough income to pay the promised rewards to investors. To fund withdrawal requests from customers, the company used new customer deposit funds and other occasions between June 2020 and 2022, the examiner also found.

In a chat with the company, Celsius Coin Implementation Specialist Dean Tappen was quoted as calling it a “Ponzi consultant,” later describing Celsius’s use of customer stablecoins for its own tokens as “very similar to Ponzi.” In response to the report, Tappen said the examiner suggested that the “Ponzi consultant” was an attempt at a “bad joke” and he couldn’t have imagined that Celsius was a Ponzi scheme.

Beginning in 2020 Celsius initiated a “buying spree” CEL’s value could be driven “higher and higher,” As per the Report. Celsius The company spent at least $558 million purchasing its token.

By 2022: Staff had been proclaiming the token regularly since 2022 “worthless” Furthermore, it is important to ask if anyone else has the same queries. Celsius In response to the report, they bought it.

“The business model that Celsius advertised and sold to its customers was not the business that Celsius actually operated,” According to the report. For years, Celsius Responding to the report, they promised extra income for purchasers. Between 2018 June 30, 2022, it had obligations towards buyers of $1.36 trillion more than the online earnings it earned from customer deposits.

The CEL tokens with beneficial properties were awarded to those consultants who had the largest share in response. Celsius Founder Alex MashinskyFraud expenses are incurred by the United States In resigning as CEO SeptemberBetween 2018 and the chapter submission, he made at least $68.7 millions from the sale CEL tokens. Co-founder Daniel Leon In response to the report, they offered a token value of not less that $9.7 million.

As per The report is available here Mashinsky In video streams and tweets, buyers were repeatedly misled by false claims. Celsius Executives kept an internal record that contained his misstatements. The video recordings were often edited without informing the thousands of viewers who had heard them in real time. This was what the examiner discovered.

Reuters Was unable to reach Mashinsky Leon For a comment. For more information, contact a lawyer Mashinsky I mentioned that the shop owner denies the allegations. She intends to vigorously defend herself in court.

Reporting By Rae Wee, Elizabeth HowcroftAnd Alun JohnAdditional reporting by Tom Westbrook Dietrich Knauth; Edited By Clarence Fernandez, Louise Heavens, Alexia GaramfalviAnd Cynthia Osterman

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