Ponzi probe finds bankrupt crypto lender Celsius wasn't doing business the way it told customers

• Celsius misled customers when it advertised its business model, a court-appointed examiner said.
• The crypto lender filed for bankruptcy in June as the market collapsed.

Celsius, the bankrupt cryptocurrency lending company, misled customers and marketed itself as a different company from how it operated, a court-appointed examiner has said in a detailed probe into allegations that the group ran a Ponzi scheme.

In a Tuesday filing linked to Celsius Network LLC's Chapter 11 bankruptcy case, former prosecutor Shoba Pillay lamented Celsius's use of risky investments and its role in "making the market" for its collapsed native coin CEL.

Celsius filed for bankruptcy in July last year, having frozen its accounts in June amid a crypto selloff that saw the value of Bitcoin (BTC) and Ethereum (ETH) plunge more than 60% and 70% from November 2021 highs.

The group had attracted customers with the promise of high-interest returns and easily available loans. The company pitched itself as being better than traditional "big banks," Pillay wrote.

"The business model Celsius advertised and sold to its customers was not the business that Celsius actually operated," Pillay said in an executive summary within her 689-page filing in the New York Southern Bankruptcy Court.

Pillay was appointed as an examiner by Judge Martin Glenn to oversee its investigation of Celsius in September. One of her priorities was to investigate whether the lender was operating a Ponzi scheme.

Celsius planned to buy CEL tokens as a means of paying customer rewards on the Earn program, but Pillay said it was increasingly "making the market" for the coin by purchasing the token with the intention of raising its price.

Pillay said Celsius spent $558 million buying its own Celsius token on the market in a bid to prop up its flagging assets. The group bought more coins on the secondary market than it distributed initially.

"In effect, Celsius bought every CEL token in the market at least one time and in some instances, twice," Pillay wrote.

She added that as the crypto boom unfolded through 2020 and 2021, founder Alex Mashinsky was forced to engage in increasingly risky investments to ensure his customers enjoyed high interest rewards, making loans that weren't fully secured and investing in other crypto and mining.

The collapse of Celsius and its CEL token, which dived from a high of around $8 in June 2021 to $0.59 today, is one of the more high-profile crypto collapses exemplified by FTX and Genesis.

Celsius didn't immediately respond to Insider's request for comment.