The collapse of Celsius had the effect of a tidal wave in the crypto ecosystem last summer. With a question: was the business model viable? This is the question posed by the judge responsible for examining the case, and he considers that the company could have operated like a Ponzi scheme.
Would Celsius have worked like a Ponzi scheme?
According to information reported by the Wall Street Journal, the judge responsible for supervising the bankruptcy process of Celsius wants to know if the operation of the company approaches a Ponzi scheme. As a reminder, a Ponzi pyramid is a financial system used in fraud. Customers’ investments are remunerated by new entrants, until that is no longer enough to make the system work.
If Celsius is accused of being a Ponzi, it is because the company could have used the new investors’ money to pay out other users’ investment returns, or fund their withdrawals. This could therefore correspond to the legal definition of this type of financial arrangement, according to Greg Pesce, who represents the Celsius creditors’ committee:
“We don’t know if Celsius is a Ponzi scheme, but there are clues that have emerged. Let’s be clear, we are currently investigating whether this is the case. We don’t have an answer yet.»
👉 To come back to the case – File: Celsius Network, why and how is the platform collapsing?
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A distinction that could be crucial for Celsius
If it turned out that Celsius was indeed operating as a Ponzi, it could have even more drastic consequences for its officials. It would no longer be a question of a company which “simply” goes bankrupt, but of a fraudulent financial arrangementwith the legal consequences that could go with it.
This accusation echoes other problematic practices that have come to light since the company’s collapse. We thus learned last September that Celsius would have been insolvent since 2019. It would have artificially increased its reserves of CEL, its native cryptocurrency, to stay afloat while attracting new investors.
The case is therefore far from being concluded, and revelations could still take place. Knowing whether or not Celsius is a Ponzi will be particularly crucial in determining what action will be taken by the courts.
👉 To read on the same subject – Celsius: the names of customers and their cryptocurrency assets revealed in a court document
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Published by Editions Larousse
Source: Wall Street Journal
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