Crypto Company Celsius Had Internal Problems for Years Before Bankruptcy, Says Former Employee

On July 14, Celsius Network, a crypto network in the United States, filed for bankruptcy.

Although the news came as a shock for investors, the employees of the said company revealed that issues have been simmering for years.

Celsius Network's Internal Problems

According to CNBC, the crypto company had a lot of internal missteps that eventually led to its turmoil.

Multiple former employees told the publication in an interview that Celsius was disorganized and was involved in market manipulation.

Timothy Cradle, Celsius' former director of financial crimes compliance, revealed that the company's biggest issue was a failure of risk management.

Despite having good ideas, the crypto company was not able to execute them well, Cradle said.

The Hoboken, a company based in New Jersey, made headlines in June after it froze customer accounts because of extreme market conditions.

The company has 1.7 million customers worldwide and $11.8 billion in deposits as of June. Celsius customers have said that they were drawn in by a 17% yield the crypto company was offering on deposits, according to Reuters.

However, behind the scenes, Celsius would lend that money to hedge funds and others willing to pay a higher yield. The company would also invest in other cryptocurrency projects that are considered high-risk.

Celsius would then split those profits with their customer. The model came crashing down along with the rate of cryptocurrencies, which caused several companies to freeze assets and at least three to file for bankruptcy.

Cradle said that he was part of a three-person compliance team between 2019 and 2021, and the role required him to apply international finance laws to the company's business, but the resources were limited.

One of the internal company documents obtained by CNBC said that when it came to assessing fraudulent cryptocurrency platforms, there is not adequate compliance staff for the number of users on the company's platform as there are only three full-time individuals.

Trading Tokens

Cradle added that he was alarmed by conversations at the crypto company's Christmas party back in 2019 about a cryptocurrency created and used by the company called "cel" token.

Executives said they were actively trading cel and increasing its prices to manipulate the market.

Celsius CEO Alex Mashinsky, its executives, and the company lawyers did not release any statement regarding Cradle's accusations.

According to the blockchain data firm Arkham, Celsius was the largest holder of cel tokens in the United States.

The firm estimated that Celsius spent $350 million acquiring tokens on exchanges over the past three years despite having billions worth in its own treasury.

At the same time, top executives were selling cel. Accounts associated with Alex Mashinsky appear to have sold around $40 million.

Cradle and other former employees of the crypto company got part of their salary in cel token. A former human resources employee said that it was a way to attract and retain talent.

The HR employee also lets them share in the company's financial upside, similar to a start-up's equity appeal.

The token began to spike in early 2020 and the following year hit a high of $8. As of July, cel's trading is under $1.

This article is owned by Tech Times

Written by Sophie Webster