A recent court-ordered report has revealed that bankrupt crypto lender Celsius Network was running a riskier business than the one which was portrayed to the public. Additionally, it was discovered that there were several hundreds of millions in losses that were not recorded in the document submitted by the crypto lending firm.
At the same time, Alex Mashinsky the former Chief Executive Officer (CEO) of Celsius Network was said to have withdrawn more than $68 million before the firm collapsed. Some employees of the firm were suspicious of the activities which they were mandated to carry out. A significant number of these employees feared that they were violating the law.
Harumi Urata-Thompson, a one-time chief financial officer (CFO) of Celsius Network, feared that they were “doing something possibly illegal.”
Harumi served as the company’s CFO from February 2020 to November 2021, just about eight months before the crypto lender chose a bankruptcy protection option.
As per a statement published in the 700-page report by Shoba Pillay, the independent examiner who was appointed to oversee the bankruptcy proceedings, the firm was not transparent before and after filing for bankruptcy.
“Behind the scenes, Celsius conducted its business in a starkly different manner than how it marketed itself to its customers in every key respect.” She said, adding that “Celsius abandoned its promise of transparency from its start.”
Celsius Network in Bankruptcy Proceedings
One of the misleading statements which Celsius made to its unsuspecting customers was the fact that it was generating the yield that it offers by conducting low-risk transactions which were 100% collateralized. However, on close investigation into its balance sheet following its bankruptcy filing in July, a $1.2 billion deficit was found with no trace whatsoever.
The bankruptcy proceedings are still ongoing and more shocking revelations may surface in the coming weeks. For now, the crypto lender has received an extension for the submission of its restructuring plan. While Celsius Network is still considering an approach for its restructuring, it plans on requesting a motion from the court to allow the sale of stablecoins in order to provide funding for its ongoing operations and maximize value for its investors and stakeholders.
Currently, Mashinsky is facing charges from the New York Attorney General (NYAG), Letitia James for defrauding Celsius’ investors.
