An independent examiner has revealed shocking details surrounding the inner workings of Celsius – a crypto lender that filed for bankruptcy in July 2022.
The examiner claimed that Celsius did not operate by the business model that it presented to customers. He likened it to a Ponzi scheme, much like FTX – a company that happened to have used the same accounting software: QuickBooks.
The Truth About CEL Token
Per a filing from examiner Shoba Pillay on Tuesday, Celsius had abandoned its commitment to transparency the moment its ICO for CEL token was completed in 2018. When the company only raised $32 million of its target $50 million from the sale, it declined to reveal its failure to the community. Furthermore, then-CEO Alex Mashinsky did not follow through on his promise to purchase any unclaimed tokens from the sale, amounting to 117 million CEL.
CEL’s value was also largely propped up by the firm. Its price increase throughout 2020 and 2021 was “significantly greater than the overall market increase,” due to the company’s timed purchases of the token. These included multiple resting orders to buy CEL if it dipped below a certain price, and an “OTC flywheel” by which CEL was bought on the open market, and then sold over the counter.
In a letter to employees, Celsius’s Head of Trading Desk said the following to the company’s then Chief Financial Officer (CFO).
“Just to clarify between us three: The last 3-4 months we bought always more CELthan what we pay as interest per week but we did not buy it for the interest payments, that is just what we told the community.”
Celsius was one of many crypto trading desks to freeze customer withdrawals in June as the crypto market tanked to lows not seen since 2017. After paying down a mountain of Defi debt to reclaim its collateral, Celsius filed for bankruptcy the following month.
Alex Mashinsky made numerous public claims that client assets at Celsius were safe prior to these events. The company also showcased its Earn program as the “safest place for your crypto,” a vault used by Celsius to trade customer funds and generate yield.
QuickBooks at Celsius?
The examiner said it was especially difficult to evaluate finances at Celsius post-bankruptcy because it used QuickBooks as an accounting system. As Pillay explained, Quickbooks is “geared mainly toward small and medium-sized businesses,”
While Celsius maintained its accounting records across 15 separate QuickBooks files, the system was not programmed to prepare the “entity-level financial information into consolidated financial statements.” As such, Celsius had to prepare manually consolidated statements, but there were some discrepancies between these statements and what was downloaded from its QuickBooks account.
“The Examiner ultimately learned that the consolidating files produced by Celsius were not the original files used to prepare the consolidated financial statements, but instead were created to respond to the Examiner’s requests,” wrote Pillay.
FTX CEO John Ray noted that the exchange, which went bankrupt in November, also used QuickBooks, which he criticized for being highly disorganized.