Celsius Creditors Aim To Expose FTX Users In Alleged Crypto Trading Scandal

Celsius Network, a popular cryptocurrency lending platform, is facing allegations of market manipulation by its creditors. According to a Bloomberg report, a committee representing Celsius creditors has requested a bankruptcy judge to subpoena FTX for information that could help identify users behind ten cryptocurrency wallets allegedly involved in suspicious trades of Celsius’ native token, CEL, between April and August of last year.

Fraud Allegations Arise Over CEL Token

The creditors believe that these FTX users may have manipulated the price of CEL through these trades, which is a serious violation of cryptocurrency market regulations. If proven true, this could significantly impact Celsius Network’s reputation and potentially lead to legal consequences for those involved.

Furthermore, The committee believes that these trades may have been a form of market manipulation, such as wash trading, which would violate cryptocurrency market regulations. To determine whether the trading was legitimate, the committee has retained blockchain consultant Elementus Inc. to investigate the matter. 

Elementus Inc. has identified 947 transactions over three days “involving a near one-to-one relationship” between CEL token deposits and withdrawals between the ten private crypto wallets and wallets on the FTX exchange. Per the report, the CEL trades occurred between the date Celsius paused customer withdrawals on June 12 and the company’s Chapter 11 filing on July 13, when the token price was 81 cents.

Determining whether the trades were legitimate is crucial to a dispute in Celsius’ bankruptcy proceedings. The company is valuing the CEL coin at 20 cents in its proposed Chapter 11 plan, arguing that the 81-cent price when Celsius went bankrupt was not an accurate reflection of the token’s fair market value.

The committee has requested permission to issue the subpoenas after contacting FTX’s lawyer on April 10. Still, FTX has “not agreed to engage in informal discovery,” according to Bloomberg’s report. 

Celsius Network’s Auction Attracts Tech Industry Heavyweights

The Failed cryptocurrency lender has attracted new bidders in a three-way auction. According to Bloomberg, two new bidders have joined NovaWulf Digital Management’s earlier bid to manage a restructured version of the bankrupt cryptocurrency company.

The new bidders are Fahrenheit LLC, a consortium backed by Techcrunch Inc. founder Michael Arrington, and Blockchain Recovery Investment Committee, backed by Gemini Trust, run by the Winklevoss twins, and exchange-traded fund manager Van Eck Absolute Return Advisers Corporation.

The official committee of Celsius creditors has won court approval to assert claims, including fraud and negligent misrepresentation, against the failed crypto lender on behalf of its account holders.

Allegations of fraud and misrepresentation have plagued the network since it filed for bankruptcy with a $1.19 billion deficit in July. The company made false statements publicly that signaled to keep money with Celsius was safer than that of a bank, according to Aaron Colodny, a lawyer representing the official unsecured creditor’s committee.

The addition of new bidders in the auction indicates interest in acquiring and restructuring Celsius Network. However, the allegations of fraud and misrepresentation have cast a shadow over the company. Potential bidders will need to address these issues to restore the trust of the Network’s investors.

Featured image from Unsplash, chart from TradingView.com