Celsius Under Federal Investigation in 40 States for Pending Crypto Withdrawals

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Crypto Regulation
Celsius Under Federal Investigation in 40 States for Pending Crypto Withdrawals

Per recent reports, the crypto-bankrupt lending organization Celsius Network is currently facing federal investigations in the United States due to alleged operational irregularities. The imminent accusations might lead to the arrest and detention of former CEO Alex Mashinsky.

Bankrupt Crypto Lending Platform in Hot Soup

Celsius Network, a cryptocurrency lender that declared bankruptcy earlier this year, told a U.S. bankruptcy court that it is the subject of several “federal investigations.” 

The lending platform was one of the more high-profile victims of the crypto market’s sharp sell-off, triggered partly by the Terra blockchain’s failure in May. The legal woes of the now-bankrupt crypto lender continue.

According to a Tuesday filing from lawyers for its committee of unsecured creditors, the company is reportedly facing U.S. federal investigations. It is worth noting that the committee represented several Celsius customers who ended up as the company’s unsecured creditors. Regarding the council, the number and scope of debtor investigations by government entities are “significant.”

The company has faced enforcement proceedings or investigations in nearly 40 states and federal government investigations or inquiries. According to a crypto report center, the document also included a statement from the Texas State Securities Board informing Celsius that multiple states were investigating him. The Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission previously investigated the lender.

Counsel of the creditors stated in a Tuesday filing:

“The number and extent of investigations of the debtors by governmental entities is significant: Celsius is apparently subject to enforcement proceedings or investigations in at least 40 states, in addition to investigations or inquiries involving the federal government.”

The judge overseeing the case has received vast letters from several customers accusing the digital currency lender platform and its former CEO, Alex Mashinsky, of misleading them about the risks of entrusting their digital assets to the company. As a result, the judge appointed an examiner to investigate these and other issues.

Furthermore, Celsius froze customer withdrawals in June to avoid a possible “panic run” by participants. A month later, it declared bankruptcy. Something that led to the loss of assets and investments of large and small scale investments organizations and individuals. 

No End in Sight for Celsius Network’s Miseries

Since declaring insolvency, the company has received widespread criticism from users for its marketing and management strategies. On June 15, it was even served with a federal grand jury subpoena. The U.S. District Court for the Southern District of New York issued the subpoena. Celsius also had a $1 billion hole in its balance sheet, as it had $4.3 billion in assets and $5.5 billion in liabilities.

Celsius Network founder Alex Mashinsky, who resigned as CEO of the troubled company in September, also found himself in hot water. The executive allegedly removed $10 million from Celsius weeks before the company ceased customer withdrawals. The collapse of the Terra fall was roiling the crypto markets at the time.

In another interesting development, an internet researcher going by the alias ‘Coffeezilla’ claimed that the former CEO was still dumping hundreds of dollars in CEL tokens. The transactions are thought to have occurred last week from Mashinsky’s various wallets. Following Mashinsky, another co-founder, Daniel Leo, resigned amid the bankruptcy proceedings.