Crypto: What we need to understand about the bankruptcy of Celsius (CEL)

Julien Arsenault reports in his tweet that the CDPQ lost $200 million in Celsius Network. This cryptobank is indeed a Ponzi scheme, according to a US government agency. She suggests that the Caisse de Dépôt et de Placement du Québec (CDPQ) placed this sum in a Ponzi scheme.

A “scam” behind Celsius Network

Vermont’s financial regulatory agency filed a document with a New York bankruptcy court on Wednesday. This document also mentions the fact that Celsius was on the verge of insolvency as early as 2019. This raises a question regarding the verification carried out by the CDPQ before investing $200 million in Celsius.

This cryptobank never made enough revenue to pay investors, according to attorney Ethan McLaughlin. In his report, he suggests that at one point investors’ returns were being paid for with money from new depositors. However, the lawyer never specified that it is a “Ponzi scheme”. But the logic behind his sentences suggests that there is some form of scam behind Celsius Network.

As a reminder, a Ponzi scheme involves paying false returns to investors. What is possible by using the money deposited by new investors.

The document does not specify whether the investment of the CDPQ was used to pay former Celsius Network investors. Nevertheless, it remains a possibility.

Celsius Network
Celsius Network

Several charges

The US government agency accuses Celsius Network of being a scam for several reasons. Indeed, this cryptobank has made false statements about its financial situation. But also about his compliance with securities law. Which probably prompted new people to invest in Celsius Network.

Alongside this, the document also mentions that Celsius’ liabilities exceeded its assets as of February 28, 2019, if we exclude the value of its CEL token. Vermont also accuses Celsius Network of manipulating the price of its cryptocurrency.

McLaughlin wrote that Celsius and its management have not been forthright with its investors in hiding its deteriorating financial condition.

Did the CDPQ carry out a full verification of the financial health of Celsius before investing? This is the question that arises. At the moment several investigations are open to find out if Celsius Network is a scam or not.

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