CNBC Report: Celsius was not stable long before bankruptcy
Former Celsius employees claim that the firm failed to ensure proper risk management and traded clients' funds without proper control.
According to former employees and internal documents reviewed in the CNBC report, Celsius Network, which filed for Chapter 11 bankruptcy last week, failed to follow proper procedures to reduce financial risk and engaged in market manipulation.
Timothy Kradle, who served as director of financial crimes enforcement at Celsius between 2019 and 2021, said the firm "didn't want to spend money on compliance with risk mitigation requirements. Kradle claimed that the firm was engaged in market manipulation of its CEL trading token.
The CNBC report also contains an allegation by an unnamed former Celsius employee who said that Celsius CEO Alex Mashinsky promoted the CEL token to the public while simultaneously selling it separately. CNBC reported that lawyers for Mashinsky and Celsius did not respond to multiple requests for comment.
According to the Arkham blockchain analytics platform, cryptocurrency wallets associated with Mashinsky have sold or exchanged CEL tokens worth about $40 million over the past three years. The CNBC report cites Cradle and internal firm documents alleging that Celsius invests and sells client assets in high-risk decentralized financing or DeFi projects without authorization or disclosure. Mashinsky said on Twitter that the firm never trades customer funds.
CNBC's report comes after Jason Stone, a former investment manager at Celsius, filed a lawsuit against the company earlier this month, alleging that Celsius was a "classic Ponzi scheme."
On its website, Celsius claims to have over 1.7 million users. But Cradle said that this figure was inflated due to fake accounts, against which the firm took no action, and that the number of real users was probably approaching 300,000.
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