Examiner’s report reveals Celsius failed to report hundreds of millions of dollars worth of losses

• A court-ordered examiner’s report into Celsius found the failed crypto lender was running a far riskier venture than revealed to customers prior to its collapse.
• Celsius failed to report hundreds of millions of dollars worth of losses, with one-third of Celsius’s institutional portfolio unsecured and half undercollateralized.

Crypto lender Celsius has come under scrutiny following the release of a court-ordered examiner’s report. The report revealed that the Ce-Fi platform, which promised transparency to its customers, failed to report hundreds of millions of dollars worth of losses.

According to the 700-page report, by mid-2021, one-third of Celsius’s institutional portfolio was unsecured and half of it was undercollateralized. The report also found that Celsius recognized $800 million in losses from investments with Grayscale, KeyFi, Stakehound, and Equities First Holdings, but did not report these losses to its customers.

Celsius’ Lack of Transparency

Examiner Shoba Pillay stated in the report that “Celsius abandoned its promise of transparency from its start.” Pillay also investigated claims that former CEO Alex Mashinsky sold CEL tokens, the native Celsius token while claiming otherwise. Mashinsky sold CEL tokens for at least $68.7 million between 2018 and the firm’s collapse, while making “repeated assertions that he was not a seller.”

The report also showed that Celsius used equity raised from outside investors to support the price of CEL tokens. This practice, according to internal communications documents, did not sit well with some Celsius staff.

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Was Celsius Operating as a Ponzi Scheme?

Pillay also illustrated instances in which Celsius used customer assets to cover the liabilities of other customers. The court also asked the examiner to look at whether Celsius operated a Ponzi scheme. Pillay’s report concluded that if Celsius had not instituted a pause, new customer deposits would have become the only liquid source of coins for Celsius to fund withdrawals.