According to a recent lawsuit, cryptocurrency lender Celsius allegedly manipulated the price of its digital coin, failed to manage its risks, and engaged in fraud. Due to the rapid emergence and decline of the cryptocurrency market, Celsius decided to suspend its withdrawals last month.
The DFR of Vermont stated that the Celsius Network is “deeply insolvent.” The state agency noted that the company does not have sufficient liquidity to meet its obligations to its depositors and other creditors.
In December 2021, Celsius lost around $54 million worth of Bitcoin after it invested with a company called BadgerDao, known for hacking. According toAlex Mashinsky, the CEO of Celsius, the company lost money, though he did not provide an exact figure.
In late 2021, Celsius partnered with the blockchain startup Anchor to provide investors with up to 20 percent deposits on TerraUSD. Unfortunately, after the cryptocurrency crashed, Celsius lost more than $535 million in its investments.
Another mistake that Celsius made was investing in Ether tokens through its DeFi platform, known as Lido Finance. According to Andrew Thurman, a blockchain analyst at Nansen, the company had around $400 million in Ethereum in its main wallet, and it might have more.
In response to this colossal debt, lawsuits started trickling in from investors and users. On June 12, Celsius stopped all of its transactions and withdrawalsto prevent a run on the bank. The company noted that it took this step to protect its customers and preserve its assets. In its blog post, the bank said it is working to maintain its liquidity and meet its obligations to its depositors.
KeyFi Inc., an investment manager, filed a lawsuit against the company, claiming that it failed to pay its dues. According to Stone, the company and its founder are taking no prisoners. Celsius is reported, in fact, in debt.
Following this lawsuit, more people are looking to file lawsuits against the company. So far, Bitboy, a YouTuber named Ben Armstrong, has threatened a lawsuit against the company and its CEO for false promises. If these lawsuits continue, they will have a considerable impact on Celsius.
Celsius’ management decided not to file for bankruptcy on June 28. They opt for this decision despite their lawyers and advisers suggesting otherwise. The company’s liquidity had also been affected by various rumors which have been circulating on the network.
Due to Celsius’ position in the industry, its liquidity could affect the crypto-verse negatively. It is one of the biggest lenders in the space, and if it starts liquidating its assets, the event could lead to negative social crypto sentiment.
Some analysts and participants believe that the company’s selling might have caused the recent decline in the market. However, it is still unclear if the project will continue through this phase. The larger market’s negative sentiment has also added to Celsius’ tragedy.
As for CEL’s price, we expect a fall like the one experienced after the coin halted all withdrawals last month if more people decide to sue. It lost over 60% of its value in just a couple of hours. From an initial high of around $0.414, the token’s price has dropped to a low of 0.1554. However, CEL might still prove critics wrong with a gaineven amid lawsuits and allegations, just like in mid-June.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any service.
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