If there was any doubt that regulators are concerned about possible market manipulation in the cryptocurrency industry, recent charges against crypto lender Celsius Network have put those doubts to rest.
Allegations of Manipulation
The Securities and Exchange Commission (SEC) has come forward with a complaint, accusing Celsius and its former CEO, Alex Mashinsky, of engaging in various fraudulent activities. The most significant charge revolves around a multiyear scheme to artificially inflate the value of Celsius’ internal token, known as CEL.
The Justice Department has also indicted Mashinsky and another executive on related charges, while the Commodity Futures Trading Commission and Federal Trade Commission have filed separate lawsuits.
Unveiling the Scheme
According to the SEC complaint, Celsius and Mashinsky devised a covert plan to bolster CEL’s market price by purchasing more tokens than they publicly disclosed. In addition, the agency claims that the company’s products should have been registered as securities, calling into question their compliance with regulatory requirements.
Firm Denials and Legal Battle
Celsius Network and Mashinsky have refuted these allegations. Attorneys for Celsius have yet to provide an official statement, while Jonathan Ohring, representing Mashinsky, has emphatically denied the charges. Ohring stated in an email, “Alex vehemently denies the allegations brought today. He looks forward to vigorously defending himself in court against these baseless charges.”
The Rise of Celsius Network
Once hailed as the largest crypto platform that rewarded investors with high yields for depositing their tokens, Celsius Network boasted impressive returns exceeding 10%. The company claimed it achieved these returns by lending the tokens to institutional investors at even higher interest rates. Investors had the option to receive the yield in their deposited token or in CEL, Celsius’ proprietary token.
Touting CEL’s Value
Mashinsky and other company executives often promoted CEL’s value during regular “Ask Me Anything” events. They highlighted a token “burning” process that helped maintain and support its value.
While the future of Celsius Network remains uncertain amidst these legal battles, the charges against the company and its former CEO serve as a stark reminder of the potential consequences facing those involved in deceptive practices within the crypto market.
Prop-Up Scheme Exposed: The Truth Behind CEL Token
In a recent complaint filed by the SEC, it has come to light that Celsius Network, a prominent crypto lender, engaged in a dubious scheme to artificially inflate the value of its token, CEL. The company not only purchased millions of dollars’ worth of CEL to prop up its price but also openly discussed these plans among its employees.
In an email obtained by the SEC, Celsius Network’s CEO, Mashinsky, boldly stated, “Our job is to protect CEL. The only way we lose is if CEL price drops significantly and people panic-sell. We can safeguard against such scenarios.” This admission lays bare the company’s intention to manipulate the token’s value for their own gain.
To further corroborate this alarming revelation, an internal message cited by the SEC highlights an employee acknowledging that the token’s value was artificially inflated through millions of dollars of spending. This startling admission adds weight to concerns raised by skeptics.
Unfortunately, the fallout from this manipulative behavior has been detrimental to depositors who entrusted their tokens to Celsius Network. The company, alongside several other crypto lenders, was forced to seek bankruptcy protection during last year’s token market collapse. Now, depositors find themselves embroiled in a battle with other creditors for whatever remnants of their tokens are salvageable.
This cautionary tale extends beyond just CEL token investors. It serves as a stark reminder for anyone considering entering the volatile world of cryptocurrencies. As the overall token market plummeted from its 2021 peak of nearly $3 trillion to around $1.2 trillion, it becomes evident that relying on the value of smaller tokens like CEL requires significant skepticism.
Unlike regulated stock exchanges, the platforms facilitating most cryptocurrency transactions often lack robust monitoring systems to detect fraud and manipulation effectively. Even industry insiders cast doubt on the trillion-dollar valuation of the token market due to rampant manipulation on these exchanges.
Recognizing the urgent need to bring some semblance of order to the crypto industry, entities like the SEC, other regulatory bodies, and lawmakers are taking steps to enforce regulations and establish rules. However, until these efforts come to fruition, token investors remain largely exposed and vulnerable.
It is imperative that investors exercise extreme caution and conduct thorough due diligence before engaging in the token market. Scrutinizing the true worth of cryptocurrencies, particularly smaller tokens like CEL, should be done with utmost skepticism.
