Celsius used deposits from new customers to pay for withdrawals from others

You may have noticed that the popular crypto-lending platform Celsius imploded spectacularly last year. Not long after Terra fell, Celsius also ran into trouble. Ultimately, that led to the bankruptcy of the crypto lending platform and slowly but surely more information about the course of business at Celsius is coming out.

Pyramid scheme

It now seems clear that in the case of Celsius there was a classic pyramid scheme. According to a independent researcherwhich was appointed by the New York court, the platform uses deposits from new users to pay for other users’ withdrawals.

In September of last year, Shoba Pillay was asked by the court to investigate the course of affairs at Celsius. The results have now been published and it has become clear what most people had already expected. Celsius operated like a classic pyramid scheme.

“In all key aspects, Celsius operated in a completely different way than it told its customers,” said Pillay, who interviewed several employees of the company for the study. The interviewees also included Alex Mashinsky, the former CEO of the crypto lending platform.

Lies, lies and more lies

Pillay’s harsh assessment is that Celsius was above all a lying machine. It could never deliver on the promises of gigantic returns on the lending platform. The painful reality is that the platform itself inflated the value of its token to attract more users to the platform. Furthermore, the company was not at all open about the risks for users, Pillay writes in the study.

In April 2022, the so-called Coin Deployment Specialist, Dean Tappen, already made it clear that Celsius’s operation was “ponzi-like”. Pillay says that the platform’s employees were also largely aware of the crypto lending platform’s false practices. They also saw that there was a huge discrepancy between the internal way of working and the public statements of the company.

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