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- 1 A CFTC investigator argued that Alex Mashinsky broke specific rules of the United States.
- 2 A lawsuit can be filed if a required number of CFTC commissioners agree with this.
On July 5, 2023, Bloomberg News reported that the ex-CEO of Celsius, Alex Mashinsky, broke U.S. rules before its collapse. Regulatory enforcement attorneys confirmed that the now-bankrupt and collapsed crypto lender should have been registered with regulators. Additionally, they acknowledged that the crypto lender misled investors.
Celsius’ ex-CEO Broke the Rules – CFTC
If most of the Commodities Futures Trading Commission (CFTC) agrees to the claim, the agency can file a lawsuit in the federal court by the end of July 2023. New York’s attorney general filed a case against the Celsius founder and ex-CEO Alex Mashinsky in early 2023. The allegations surrounded the claims mentioned in the filings.
He defrauded investors with billions of dollars worth of digital currency. Mashinsky did so by hiding the degrading health of the crypto lending platform. Furthermore, the independent examiner appointed to oversee its bankruptcy case alleged that the lender operated as a Ponzi scheme and revealed how the firm handled crypto assets.
Celsius is preparing to file a motion later this week requesting an extension of the bar date, which is the deadline to file a claim, from January 3, 2023, until early February.
— Celsius (@CelsiusNetwork) December 29, 2022
After the infamous collapse of TerraUSD in May 2022, the crypto lender was forced to file for Chapter 11 bankruptcy on July 12, 2022. On December 29, 2022, the company tweeted about filing a motion to extend the deadline for claim filings from January 3, 2023, to early February 2023 to grant its account holders some extra time to file any proof of claims.
The Southern District of New York bankruptcy court nominated an independent examiner to scrutinize the company’s finances. As per the September 2022 all-hands meeting recording, the crypto lender was formulating a plan for revival, and the Committee of Unsecured Creditors (UCC) did not favor this idea.
According to the leaked audio, the firm expressed its desire to develop new business plans and conclude the final debt payment by utilizing the revised strategies, approaches, and product offerings. Additionally, the revival plan involved having a third-party examiner to oversee the crypto lender’s finances. However, the UCC and the creditors filed a petition in the court asking for an independent examiner, which the court obliged with on September 14, 2022.
Interestingly, the next day, on September 15, 2023, the UCC released its investigation regarding thousands of documents related to the crypto lender. The results showed that the firm is trying to access the current holdings of stablecoins worth $23 million.
Bankruptcy Judge Martin Glenn slashed all investors’ hopes in getting refunds from the now-bankrupt crypto lender. He made a ruling taking into account the company’s terms of use, especially Version 8 of the company’s agreement of usage, which 99.86% of Earn Account holders agreed to. It states the company has “all rights and title to such Eligible Digital Assets, including ownership rights.”
Fahrenheit will now acquire Celsius Network LLC and establish and operate the new company (NewCo). It will also provide financial support, experienced employees, and technological expertise to the bankrupt crypto lender. Reuters reported on May 25, 2023, that all the account holders of the crypto lender would own 100% new equity in NewCo.
The newly formed company will have a new board of directors appointed by the creditors. Earlier, the bidders in line to acquire the bankrupt crypto lender were NovaWulf, Coinbase, Gemini, and Proof Group Capital Management.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
