Arkansas Resident Sues Crypto Lender Celsius
According to reports, Taylor Goines, a resident of Arkansas, has filed a lawsuit against Celsius. Goines accused the crypto lender of marketing unlicensed securities. Also, the investor compared the company’s business model to a Ponzi scheme.
John Reed Stark had made the filing public. Stark is the CEO of a consulting firm. The firm helps fintech firms to comply with FINRA and SEC regulations.
Moreover, Goines stands as the plaintiff representing all Americans who bought CEL tokens, Celsius Earn Rewards, and Celsius loans between February 2018 till date.
Meanwhile, Goines referred to Celsius as a Ponzi scheme. Elaborating on it, he said more investors had to join constantly so previous investors would receive their yield.
Recently, the lending platform had filed for Chapter 11 bankruptcy. This was after it had blocked clients’ withdrawals at the beginning of June.
According to the firm, filing for bankruptcy would provide it with some space to stabilize its operations. Furthermore, the firm noted that it had to stop withdrawals last month.
If Celsius had not stopped withdrawals, it would have led to a bank run crisis. In this situation, early withdrawers would’ve had their transactions fulfilled. However, the outcome for minor withdrawers would have been less assured.
Celsius Misled Investors
Celsius has advertised high-yield investment products since its inception. However, it misled investors by saying they were low-risk products.
As a result, they made money by borrowing from institutions that needed loans. Meanwhile, it did so at interest rates that were higher than what it gave for deposits.
Unfortunately, the demand for institutional loans dipped in 2020. Then, Celsius started experimenting with high-risk investments.
The company began to invest in DeFi products without considering the associated dangers. As stated by the complaint, Celsius refused to file its yield or interest-bearing products with the US SEC.
Also, Celsius and its executives made false assertions about how it handled certain products. Meanwhile, the complainant is asking for compensation for the funds they have lost so far.
Consultant Slams Celsius For Refusing To Register With The SEC
Following the publication of the litigation filings, Stark criticized Celsius on LinkedIn. He emphasized that Celsius was not licensed by the SEC.
As a result, it did not offer its clients FDIC (Federal Deposit Insurance) in the case of crisis. Therefore, the only redress available to the victims is the money left from the settlements.
Also, Jason Stone, a former staff of Celsius, filed a lawsuit against the business last week. He alleged the firm was involved in market manipulation of cryptocurrencies and had questionable accounting methods.
Furthermore, the plaintiff requests a jury hearing, which Stark predicts Celsius will surely lose. It is uncertain if there will be enough money left after the lawsuit to pay victims.
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