In a new twist to the ongoing legal battle surrounding bankrupt cryptocurrency lending platform Celsius, creditors have made fresh allegations against crypto market maker Wintermute.
According to a recent court filing cited by Bloomberg on June 23, creditors have amended their lawsuit in the United States District Court of New Jersey, claiming that Wintermute collaborated with Celsius executives in manipulating the price of CEL tokens through improper market trading.
The amended lawsuit alleges that Wintermute, at the behest of Celsius Network’s CEO Alex Mashinsky and other executives, participated in wash trading, an illegal practice of simultaneously buying and selling an asset to create false activity and artificially inflate trading volume. The creditors accuse both the Celsius executives and Wintermute of acting with “scienter,” indicating intentional fraudulent intent.
The alleged scheme came to light through internal conversations among Celsius executives, which were made public. The filing states that Wintermute’s involvement in these “improper market making” activities lasted from approximately March 2021 until Celsius froze withdrawals in June 2022.
The creditors assert that Celsius had inadequate measures in place to prevent such misconduct, with controls that were virtually non-existent and failed to monitor or protect against wash trading and self-dealing.
These developments follow the recent acquisition of Celsius Network’s assets through an auction. Reports on May 25 revealed that crypto consortium Fahrenheit emerged as the successful bidder, acquiring assets previously valued at $2 billion.
The consortium obtained Celsius Network’s institutional loan portfolio, staked cryptocurrencies, mining unit, and other alternative investments. This acquisition comes nearly a year after Celsius initially filed for Chapter 11 bankruptcy in July 2022.
As the legal proceedings continue, these new allegations of market manipulation and improper trading raise further concerns about the practices conducted within the cryptocurrency lending platform and the involvement of Wintermute. The outcome of the lawsuit will shed light on the extent of the alleged misconduct and its consequences for Celsius, its creditors, and the broader cryptocurrency industry.
