Celsius misled its investors – and on occasion used new customer funds to pay for other customers’ withdrawals, the usual definition of a Ponzi scheme, an independent examiner for the New York bankruptcy court said in a Tuesday filing.

In September, Shoba Pillay was asked by the court to offer an outside view of goings-on at the crypto lender, has now published an account of the firm’s operations in the run up to bankruptcy being declared in July.

Promises of a community-led lending system offering lavish returns and financial freedom clashed with a reality where the company itself was largely creating the market in native token CEL, and wasn't open with customers about the risks they faced, Pillay said.

In April 2022, Celsius’s Coin Deployment Specialist Dean Tappen described Celsius’s practices as “very ponzi like,” Pillay said, adding that staff were aware of the discrepancy between internal CEL mechanics and public pronouncements.

On June 12, Celsius paused customer withdrawals and had it not done so, “new customer deposits inevitably would have become the only liquid source of coins for Celsius to fund withdrawals,” Pillay said.

(By Jack Schickler)