CFTC accuses Celsius of misleading investors, may file a lawsuit 

Investigators at the Commodity Futures Trading Commission (CFTC) have concluded that the now-defunct crypto lending platform had violated U.S. laws by misleading investors and failing to register with the agency before it imploded last year. 

Celsius (CEL) Network, a once-popular digital assets lending platform, is on the verge of getting sued by the CFTC’s enforcement unit, as investigators have concluded that the firm and its former CEO, Alex Mashinsky broke regulations.

According to a Bloomberg report, citing anonymous sources familiar with the matter, investigators at the CFTC have concluded that Celsius and Mashinsky misled users by touting their lending product as being entirely risk-free.

The agency also faulted Celsius’s failure to come under its purview before its implosion in June 2022. Suppose most CFTC officials agree with the investigators’ conclusion. In that case, sources say the embattled firm, which already faces enforcement actions from the SEC and allegations of fraud from New York Attorney General Letitia James, could be in more trouble.

In May, Fahrenheit Consortium completed the acquisition of Celsius Network, securing nearly $2 billion worth of the bankrupt lender’s assets. 

With the SEC recently categorizing more than 60 crypto assets as securities, Celsius got approval to convert its entire altcoin holdings to bitcoin (BTC) and ether (ETH) starting from July 1. The team believes the move will streamline its payout to creditors and enable it to maximize value.

Celsius’s implosion and that of several of its counterparts in the crypto lending business has once more underscored the need for stronger capital controls amid volatile market conditions. 

The high-profile web3 bankruptcies since the past year have brought increased regulatory scrutiny upon market participants, with Gary Gensler’s SEC and the CFTC filing swats of lawsuits against various industry players to date.

Nexo, one of the few centralized crypto lenders that have remained solid so far, reached a  $22.5 million settlement with the US SEC earlier in January for offering its lending product to residents.