Celsius creditors have begun a class action lawsuit to recover funds that they say were fraudulently transferred from the founder and other top executives before the company’s implosion. They are now going after the personal proceeds of Alex Mashinsky, his wife, and several other top figures at the firm who all withdrew funds before the company’s imminent collapse.
The CEL price was heavily manipulated
Court documents filed Tuesday allege that Mashinsky and his team heavily manipulated the CEL token price and made “negligent, reckless and sometimes self-interested investments”.
This is viewed as a clear abnegation of their corporate responsibility, and has been a huge cause for concern amongst regulators, who have been gifted a further impetus to take heavy handed measures against the centralised crypto lending space masquerading under the guise of “CeDeFi”.
#Celsius & @CelsiusUcc going after claims & causes of action against insiders due to "fraud, recklessness, gross mismanagement, and self-interested conduct." https://t.co/uUGwi7Zlxl pic.twitter.com/lqYdoVg85v
— Simon Dixon (@SimonDixonTwitt) February 14, 2023
In addition to the billions of dollars that the Celsius management already lost for their customers, the complaint would go after many of the personal assets of the top executives in order to bring these funds back to creditors.
There are many aspects to this, not least of which the $2.8m that was transferred from Celsius to Mashinsky’s personal wallet in May of 2022, which is deemed to be a direct violation of the US bankruptcy code.
In addition to this, the filing also stipulates that $12m transferred to AM Ventures and $5m transferred to Koala LLP (two companies that were both owned and controlled by Mashinsky) were also illegal transfers.
One of the claims that the team at Celsius are already having to face is the fact that clients’ bitcoin was used to buy CEL off exchanges in order to pump the price past $2, which was a key level since it meant that insiders would be able to offload their holdings (as stipulated in their early fundraising rounds).
What does this mean for Celsius creditors?
The court filing has given some optimism to Celsius creditors that Mashinsky will be forced to forfeit more personal assets to the US bankruptcy court, but there is still a huge hole in the balance sheet that hasn’t yet been filled – and is unlikely to ever be filled.
Creditors will still have to wait a considerably long time for the debacle to fully unfold, but it does seem as though some semblance of justice is returning in that Mashinsky himself may be forced to now forfeit personal assets.
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