A former Celsius executive has alleged that the crypto lending firm may have been negligent in various ways leading up to its ultimate bankruptcy.
According to a new report by CNBC, Celsius’ former director of financial crimes compliance Timothy Cradle says that the embattled company was allegedly neglecting compliance laws and manipulating the price of its native asset CEL long before filing for insolvency.
Cradle says Celsius’ biggest issue was managing risk.
“The biggest issue was a failure of risk management. I think Celsius had a good idea, they were providing a service that people really needed, but they weren’t managing risk very well.”
According to internal documents seen by CNBC, Celsius was lending out customer deposits to hedge funds and others willing to pay higher yields, and then splitting profits earned with customers.
The strategy ultimately failed when the price of crypto assets heavily dipped, forcing the company to put a halt on customer trades and withdrawals.
Cradle says that Celsius did not have a large enough compliance team to apply international finance laws to its business model.
“The compliance team was too small. Compliance was a cost center – basically, we were sucking out money and not bringing any back in. They didn’t want to spend on compliance.”
The former employee goes on to note that he overheard company executives talking about manipulating the CEL token at a Christmas party in 2019.
As per the report, employees were overheard talking about “pumping up the cel token” and “actively trading and increasing the price of the token.”
“They weren’t shy about it. They were absolutely trading the token to manipulate the price. It came up in two completely different conversations for two completely different reasons.”
CEL is changing hands for $0.797 at time of writing, a 3% increase on the day.Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
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