Creditors of the bankrupt cryptocurrency lending platform Celsius have recently amended their lawsuit to accuse Wintermute, a prominent crypto market maker, of participating in a wash trading scheme. The allegations suggest that Wintermute colluded with Celsius executives to manipulate the price of CEL tokens through improper market trading, ultimately defrauding investors. These developments add another layer of complexity to the ongoing legal battle surrounding Celsius Network and its troubled operations.
Allegations of Wash Trading Scheme Emerge
In a recent court filing in the United States District Court of New Jersey, creditors of Network have expanded their lawsuit to include Wintermute, a well-known market maker in the crypto space. The amended complaint alleges that Wintermute was complicit in facilitating a wash trading scheme orchestrated by Celsius executives, including the CEO, Alex Mashinsky. Wash trading is a manipulative practice that artificially inflates trading volumes to create a false impression of market activity.
The creditors claim that Wintermute collaborated with executives to unlawfully manipulate the price of CEL tokens and profit from the illegal wash trading of unregistered tokens. The alleged scheme was reportedly uncovered through publicly available internal conversations among executives, which provided evidence of Wintermute’s involvement in these improper market-making activities. According to the filing, Wintermute’s assistance allowed the Celsius team to artificially inflate the trading volume of CEL tokens and deceive investors.
Lack of Controls and Freezing of Withdrawals
The amended lawsuit highlights the lack of effective measures in place to prevent improper market-making at Celsius Network. The creditors argue that the controls designed to monitor and protect against wash trading and self-dealing were virtually non-existent. This raises concerns about the overall integrity of the platform’s operations and its potential impact on investors.
Moreover, the alleged collaboration between Celsius executives and Wintermute reportedly persisted from around March 2021 until June 2022 when Celsius froze withdrawals. The freezing of withdrawals further intensified the suspicions surrounding the platform, as investors were unable to access their funds during this period. These events underscore the need for increased regulatory oversight and robust control mechanisms within the cryptocurrency industry to protect investors from potential fraud and manipulation.
Acquisition of Celsius Network’s Assets and Farhenheit’s Role
In a separate development, Celsius Network’s assets were recently acquired through an auction process. The winning bidder, crypto consortium Farhenheit, acquired the assets of Celsius, previously valued at $2 billion. The acquired assets include Celsius Network’s institutional loan portfolio, staked cryptocurrencies, mining units, and other alternative investments. This acquisition comes almost a year after Celsius initially filed for Chapter 11 bankruptcy in July 2022, signaling a potential resolution for the troubled platform.
The allegations brought forth by creditors against Wintermute’s involvement in a wash trading scheme with Network executives have added another layer of complexity to the ongoing legal battle surrounding the bankrupt crypto lending platform. The accusations raise serious concerns about the integrity and transparency of Celsius Network’s operations, as well as the role of market makers in facilitating manipulative practices.
As the case unfolds, it will likely shed light on the broader issues of market manipulation and investor protection within the cryptocurrency industry, underscoring the need for stricter regulatory oversight and robust control mechanisms to safeguard investors’ interests.