In a lawsuit, troubled cryptocurrency lender Celsius Network has been charged with fraud. Since June 12, users of Celsius have been unable to access their money. On June 30, the business disclosed that it is thinking about re-organizing its debt. The Celsius Network Scandal has become a full-blown issue now.
What is the Celsius Network Scandal?
According to the complaint, Celsius engaged in “gross mishandling of client deposits” in order to enrich itself and deceived plaintiff KeyFi Inc, run by former manager Jason Stone, into offering services worth millions of dollars while refusing to make any payment for the same.
The former investment manager for Celsius Network said in a complaint that the cryptocurrency lender, which last month had its assets frozen, had lost hundreds of millions of dollars by failing to hedge risk and had instead used customer funds to manipulate the price of its own token. Stone’s charges come after Celsius decided on June 12 to halt transfers and withdrawals for its 1.7 million customers due to “extreme” market conditions.
He filed a lawsuit against the cryptocurrency lender, alleging that it had frozen customer funds and had rigged the price of its own cryptocurrency token using user contributions. Celsius guaranteed retail consumers disproportionate returns, up to 19% yearly. However, Stone claimed that Celsius had trouble paying investors because it neglected to hedge its bets, leading to “severe” losses when the value of several coins changed.
What is the Scenario?
The accusations have come as bitcoin markets are experiencing a credit crisis. One of the largest cryptocurrency lenders, Celsius, has been having trouble raising money in the shaky digital asset market, which has been affected by:
- Increasing interest rates,
- A lack of liquidity, and
- The recent failure of the Terra blockchain.
Broker Voyager Digital Ltd. filed for bankruptcy last week, hedge fund Three Arrows Capital was ordered into liquidation last month, and other companies that offer high-yield products, such as Babel Finance and Vauld, have banned withdrawals.
When it became apparent that the hedging difficulties may be financially catastrophic for Celsius and harm KeyFi’s reputation, Stone claims that he ended the connection in March 2021. However, Stone claims that Celsius has refused to accept his resignation.