Celsius Network, which filed for Chapter 11 bankruptcy last week, failed to follow appropriate procedures to reduce financial risk and engaged in market manipulation, according to former employees and internal documents reviewed in a report by CNBC.
Timothy Cradle, who served as director of financial crimes compliance at Celsius between 2019 and 2021, said the firm “didn’t want to spend on compliance,” CNBC reported. Cradle alleged that the firm engaged in market manipulation of its CEL trading token.
The CNBC report also contained an allegation from an unnamed former Celsius employee who said Celsius chief executive officer Alex Mashinsky promoted the CEL token to the public, while separately selling it.
CNBC said Mashinsky and Celsius company lawyers did not respond to multiple requests for comment.
According to data from the Arkham blockchain analytics platform, cryptocurrency wallets connected to Mashinsky sold or swapped around US$40 million worth of CEL tokens over the past three years.
The CNBC report cited Cradle and the firm’s internal documents to allege that Celsius was investing and trading customer assets in high risk decentralized finance, or DeFi, projects without authority or disclosure. Mashinsky had claimed on Twitter that the firm never trades customer funds.
The CNBC report comes after Jason Stone, a former Celsius investment manager, filed a lawsuit against the company earlier this month alleging that Celsius was a “classic Ponzi scheme.”
On its website, Celsius claims to have over 1.7 million users. But Cradle said that figure was inflated due to fake accounts for which the firm took no action and that the number of real users was probably close to 300,000.