Hidden behind the public view is our industry’s biggest secret, the so-called crypto shadow banking, where billions of dollars were borrowed & lent on an un-collateralized basis. Crypto shadow banks such as Celsius engaged in crypto borrowing & lending but were not licensed banks. Celsius was outside the requirements of fully licensed banks, which have capital reserves to cover losses from bad loans or available liquidity in case of a bank run. With the promise of high-interest rates, Celsius raised billions of dollars from retail and institutional investors. All those billions of dollars got lent out further to the world’s biggest crypto traders such as Three Arrows Capital Pte Ltd and Alameda Research, which fueled the spectacular bull run in 2021 that took Bitcoin from $10'000 to above $69'000. The U.S. Securities and Exchange Commission, U.S. Commodity Futures Trading Commission, and Federal Trade Commission sued today the founder & CEO for securities fraud, commodities fraud, and wire fraud. In a nutshell, the CEO repeatedly lied to investors about the risks. He claimed that all loans by Celsius are secured & collateralized, while the truth was the platform gave out uncollateralized loans to the world's largest crypto traders that spectacularly blew up after the Terra/LUNA collapse. Additionally, the CEO was dumping the worthless CEL token on retail, while using clients' funds to prop up the price of the token on crypto exchanges. The saga around the bankrupt crypto shadow banks continues and until we as an industry resolve these issues, we can expect the ongoing nuclear crypto winter to continue.

This story contains new, firsthand information uncovered by the writer.

Hot off the press! This story contains factual information about a recent event.

Liquidation Engine for Crypto Derivatives Trading: Here's What You Need to Know

CRYPTO SHADOW BANKING: Celsius CEO Arrested as SEC, CFTC and FTC Sue the Bankrupt Crypto Lender

About Author

Comments

TOPICS

THIS ARTICLE WAS FEATURED IN

Related Stories

Coinbase Launches Perpetual Futures Exchange; 5 Years Too Little, Too Late

Are Crypto Savings Accounts Safe to Use?

Earn Crypto Interest with Celsius Network

Hack3d Unpacked: Current Trends and What They Mean for the Future of Web3

It Got Really Hot With Celsius

Paxful Reimburses All Users Impacted by Celsius Bankruptcy

Coinbase Launches Perpetual Futures Exchange; 5 Years Too Little, Too Late

Are Crypto Savings Accounts Safe to Use?

Earn Crypto Interest with Celsius Network

Hack3d Unpacked: Current Trends and What They Mean for the Future of Web3

It Got Really Hot With Celsius

Paxful Reimburses All Users Impacted by Celsius Bankruptcy

Light-Mode

Classic

Newspaper

Minty

Dark-Mode

Neon Noir

Minty

HN StartUps