Celsius’ $750 million insurance is a lie and the claim is ‘intentional deception’, says lawyer

by George Georgiev
7 ways to make with crypto

Celsius’ $750 million insurance is a lie and the claim is ‘intentional deception’, says lawyer

After going bankrupt and incurring massive losses for investors, the cryptocurrency lending platform Celsius has faced multiple lawsuits, and that is only one side of its troubles as an attorney representing affected clients has made accusations of securities fraud.

Specifically, Dr. Jonathan Levy, whose clients have millions of dollars in assets bound in Celsius accounts, has referred to the Celsius insurance claims as a case of fraud related to offering unregulated securities, Finance Feeds reported on August 16.

As the attorney explained:

“The insurance does not exist. Celsius’ own term of use stated there was no insurance in the boilerplate print. Yet we have Celsius and GK8 claiming insurance in bold print. It is an intentional deception in aid of a billion-dollar securities offering.”

Questionable insurance claims

Indeed, using a web archive tool, Finbold was able to determine that, as of July 5, Celsius had previously had information on its website claiming its assets were insured for $750 million. However, after the firm claimed bankruptcy on July 13, any mentions of insurance mysteriously vanished from the website.

Celsius’ $750 million insurance is a lie and the claim is ‘intentional deception’, says lawyer

Celsius website on July 5, 2022. Source: Wayback Machine Web Archive/Celsius

On top of that, Celsius asserted it had insurance through Fireblocks, but the tech platform’s compliance officer denied that Fireblocks had anything to do with the insurance or custodial business itself and that it merely offered custody software to its clients.

Meanwhile, Celsius’ subsidiary GK8 states it has a $500 million insurance through AON (NYSE: AON), but the crypto lender’s CEO Alex Mashinsky has said that it was never integrated into Celsius’ operations. Dr. Levy questioned the legitimacy of these insurance claims as well.

Lawsuits and probes keep on stacking

As a reminder, the Celsius saga began in early June when the platform froze customer withdrawals citing extremely unfavorable market conditions at the time that affected liquidity. Despite reassuring the public it was working on restoring business as usual, it filed for bankruptcy on July 13.

Consequently, multiple lawsuits were filed against the lender, including the one in which its former employer accused it of running a Ponzi scheme that led to freezing customer funds, as Finbold reported.

At the same time, the class action proposed to a federal court in the U.S. state of New Jersey has alleged that Celsius incurred $10 billion by selling unregulated securities in a Ponzi scheme, as well as convinced investors to purchase its financial products at inflated rates.

In the meantime, Canadian regulators launched a probe into Celsius in mid-June, right after the withdrawal freeze and before the bankruptcy filing, in an effort to unveil what was taking place behind the curtain.

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