Celsius, the insolvent crypto loan platform, is facing the threat of a federal lawsuit after findings from the Commodity Futures Trading Commission (CFTC) accuse the firm of scamming investors out of billions of dollars. Lawyers from the enforcement section of the CFTC concluded that Celsius had deceived investors, should have registered with the regulator, and that former CEO Alex Mashinsky had also broken the law.
The CFTC’s investigation is just the latest regulatory action against Celsius, as federal prosecutors in Manhattan and the SEC are also conducting their own investigations. New York Attorney Letitia James, who previously filed a lawsuit against Mashinsky, tweeted that he had lied to people about the risks of investing in Celsius, concealed its deteriorating financial condition, and failed to register in New York.
The lawsuit filed by the New York Attorney General alleges that Mashinsky had deceived investors by promising sustainably high returns through low-risk collateralized loans to institutions and cryptocurrency exchanges. However, as the company expanded, it struggled to generate enough revenue to fulfill these promises, leading Celsius to move into riskier investments and extend uncollateralized loans.
A recent court order mandated Celsius to sell over $70 million worth of altcoins, including Bitcoin and Ethereum. Additionally, according to Arkham Intelligence, Celsius holds approximately $614.28 million worth of crypto assets in its wallets. These assets may be subject to scrutiny and potential penalties if the federal lawsuit moves forward.
The final decision on whether to bring a lawsuit against Celsius rests with the CFTC, which is expected to make a determination this month. If found guilty, Celsius could face severe penalties and fines, further impacting its already troubled financial position. The investigation and potential legal action against Celsius underscore the importance of regulatory compliance and transparency in the crypto lending industry.
Investors are increasingly seeking assurances that their funds are secure and that platforms like Celsius are operating within the confines of the law. The ongoing investigations highlight the need for stricter oversight and regulation in the evolving world of cryptocurrencies to protect investors from fraudulent activities and uphold the integrity of the market.