It appears that problems were simmering at Celsius Network for years before the crypto lending platform decided to file for bankruptcy. It certainly is not the only company in the crypto space that was struggling recently and ended up filing for liquidation. But, it turns out that the problems had existed long before the crypto bear market that resulted in a crisis for numerous operations.
According to documents and former employees, there was a range of missteps internally in the crypto company that led to this day. A number of employees were able to paint a picture of disorganization, risk-taking as well as alleged market manipulation.
The former director of financial crimes compliance at Celsius Network, Timothy Cradle said that the primary issue that the crypto company had was its failure to manage risks. He said that Celsius was aware that it was offering a service that people required, but it did not do a good job of risk management.
A month ago, the company, which is based in Hoboken, New Jersey, made headlines when it announced that it was freezing its withdrawals because of ‘extreme market conditions. Celsius Network had about 1.7 million customers at that time and the total assets under its management as of June stood at $11.8 billion.
The company model
According to its customers, the 17% yield that Celsius Network was offering is what had drawn them towards the platform. The company would take crypto deposits from its clients and then lend the money to hedge funds or other companies that were ready to pay a higher yield.
Internal documents also show that the company invested in some other crypto projects that were highly risky. Those profits would later be split with the customers. However, as the price of cryptocurrencies came down, the model collapsed and this saw multiple firms, including Celsius Network, to freeze their assets and about three of them eventually filed for bankruptcy.
The compliance team
According to Cradle, he was part of Celsius’ compliance team between 2019 and 2021 and there were a total of three members. His position entailed the application of international finance laws to the company’s business, but he disclosed that they had limited resources.
He asserted that the team was just not big enough because Celsius considered compliance a cost center. This means that it was just taking money and not bringing in anything, so the company did not want to spend more on compliance.
His claim is echoed in the company documents. The document said that in order to assess fraudulent crypto platforms, the compliance staff was not enough because there were only three people, and the amount of customers Celsius had was significantly higher.
Cradle added that conversations in 2019 at a Christmas party about the ‘Cel’ token had alarmed him. He said that executives had talked about pumping the token and trading it actively to boost its price. They were open about manipulating prices and there were several conversations where this was discussed.