Months after Celsius stopped customer withdrawals, the pileup of unanswerable questions has continued unabated. With each passing day, new controversies continue to emerge, new lies are uncovered, and customers’ hopes of ever getting their money back fade.
Celsius Styles Itself a “Shadow Bank”
For instance, the troubled cryptocurrency company is now referring to itself as a “shadow bank,” claiming that under its revised terms and conditions, its clients signed away the rights to their crypto assets in favor of Celsius.
The lawyers also argued that Celsius’s TOU expressly stated that clients might not receive all—or even any—of their funds back in the event of bankruptcy.
Clients Reach Out to Law Enforcement
Up to 80% of Celsius’s customers stand to lose their investment if Judge Martin Glenn agrees with the controversial interpretation of the crypto firm’s TOU. For that reason, many Celsius customers are reaching out to the court and law enforcement agencies, pleading for their assets back and detailing Celsius CEO Alex Mashinsky’s role in convincing them to stay with the company.
And according to crypto commentator FlyCryptoGuy, Celsius customers would rather not receive cash payments in lieu of their coins as that would be a taxable event.
CEO Could Face Serious Legal Consequences
According to lawyers, Alex Mashinsky and his cronies could face severe consequences for their actions, including civil liability for fraudulent transfer and insider preference. Such a situation could expose them to fines or court-ordered repayments.
Furthermore, if it is found that they misrepresented their actions to customers or lied during bankruptcy proceedings, they may face criminal prosecution and even jail time.
However, many legal and practical obstacles will need to be overcome for this to happen.
Investors Ignored Red Flags
While things might have seemed rosy on the surface, there were signs that Celsius was not all it claimed to be. The first red flag was raised when Mashinsky failed to adequately explain how Celsius could generate such high yield returns on Bitcoin and Ethereum while claiming to be much less risky than traditional financial institutions.
Additionally, a 2020 report also highlighted that Celsius claimed not to offer non-collateralized loans when it actually did.
Then there was Mashinsky’s perplexing behavior whenever he was asked direct questions about Celsius. He always turned things around and talked about all the great things he’d done in the past.
And to top it all off, there is the claim by former asset manager Jason Stone that Celsius was run like a Ponzi scheme, promising unsustainable interest rates that went as high as 18% and using customer funds to inflate the price of its native token.
A lot of damning information about Celsius remains unpacked, but more and more, Alex Mashinsky is looking increasingly like crypto’s version of Bernie Madoff. Will he receive the same punishment? Only time will tell.