- Celsius Network gets sued by the Vermont Department of Financial Regulation.
- The lawsuit alleges Celsius engaged in many activities that amount to fraud.
- The lead investigator for the bankruptcy probe is yet to be decided.
Celsius Network faces a probe from a bankruptcy judge to investigate many allegedly fraudulent activities. Matters under scrutiny are: inflating the price of its own digital coin, marketing appeal to attract new customers, its business practices, and whether it operated as a Ponzi scheme.
Earlier this year, Celsius Network LLC and certain of its affiliates filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the U.S. The Honorable Judge Martin Glenn has been presiding over the case. However, things have turned awry for Celsius after the Vermont Department of Financial Regulation sued them for fraud.
Courtesy of the customers’ demand to scrutinize the use of their money by Celsius. The Vermont state regulators have alleged that the crypto lenders were a Ponzi scheme and their losses fall back to 2020 which showed no signs aligning with their claims that its collapse was due to the crypto crash and massive withdrawal earlier this year.
The judge has appointed an independent examiner, Shoba Pillay, partner at Jenner & Block, to probe the facts about the allegations of mismanagement by the company executives. This is in addition to the official committee of the Celsius creditors.The creditors’ committee lawyer, Greg Pesce, said:
We don’t know if Celsuis was a Ponzi scheme but there are flags that came up. We’re looking into whether it is. We don’t have an answer to that
Members of the committee had concerns over the inclusion of an external investigator raising arguments that Pillay’s work might be costly and time-consuming and it may duplicate its own efforts.
However, the judge and state regulator from Texas and Vermont argued in favor of having an independent third party such as Pillay issue her inquiry to the public. The judge has left the decision-making between the committee and Pillay.
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