Insolvent crypto loan platform Celsius is facing the possibility of a federal lawsuit after findings from the Commodity Futures Trading Commission (CFTC) accused the firm of scamming investors out of billions of dollars. According to sources familiar with the matter, lawyers in the CFTC enforcement section determined that Celsius had deceived investors and should have registered with the regulator. Additionally, former CEO Alex Mashinsky has been alleged to have broken the law.
The CFTC, which oversees the derivatives market in the United States, is expected to make a decision this month on whether to proceed with the lawsuit. This development marks yet another regulatory action against Celsius, with federal prosecutors in Manhattan and the Securities and Exchange Commission (SEC) also investigating the matter.
New York Attorney Letitia James, who previously filed a lawsuit against CEO Alex Mashinsky, took to Twitter to accuse him of lying to investors about the risks involved, concealing the company’s deteriorating financial condition, and failing to register in New York. The attorney general’s lawsuit alleges that Mashinsky misled investors by promising high returns through low-risk collateralized loans. However, as the company expanded, it struggled to generate sufficient revenue to fulfill its promises, leading to riskier investments and losses amounting to billions of dollars.
In an effort to recoup some funds, Celsius recently sold over $70 million worth of altcoins, including Bitcoin and Ethereum. This move follows a court order mandating the sale of these assets. It has been reported that Celsius still holds crypto assets worth $614.28 million in its wallets, according to Arkham Intelligence.
The impending federal lawsuit poses further challenges for Celsius as it deals with a series of legal investigations and allegations. The company’s alleged misconduct has raised concerns about investor protections and the need for increased regulation in the crypto lending industry. As the outcome of the regulatory actions remains uncertain, it is crucial for investors and consumers to exercise caution and conduct thorough due diligence when engaging with similar platforms.