Celsius Creditors Accuse Wintermute Of Manipulative Wash Trading Scheme

Updated: 31 May 2024

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Creditors of the bankrupt crypto lending firm Celsius Network recently amended their lawsuit to accuse Wintermute, a major crypto market maker, of participating in a wash trading scheme.

The allegations claim that Wintermute colluded with Celsius executives to manipulate the price of CEL tokens through improper market trading, ultimately defrauding investors.

Wash Trading Allegations

According to a June 23 Bloomberg report, which cited a recent court filing, Celsius creditors have recently amended their lawsuit in the United States District Court of New Jersey, which allege that Celsius executives engaged Wintermute in wash trading.

The complaint suggests that Wintermute was complicit in enabling a wash trading scheme orchestrated by Celsius executives, including the CEO, Alex Mashinsky.

Wash trading is a manipulative practice that artificially inflates trading volumes to create a false impression of market activity.

The creditors further claimed that the Celsius executives and Wintermute acted with “scienter in connection with the alleged manipulative acts. ”

As per the filing, the alleged scheme was uncovered through “publicly available internal conversations” among executives, which provided evidence of Wintermute’s involvement in these improper market-making activities.

Moreover, the alleged collaboration between Celsius executives and Wintermute reportedly persisted from around March 2021 until June 2022, when the lending platform froze withdrawals.

The freezing of withdrawals further intensified the suspicions surrounding the platform, as investors could not access their funds during this period.

Celsius Network Acquisition

However, in recent developments, crypto consortium Fahrenheit (the winning bidder) acquired Celsius Network’s assets through an auction process, previously valued at $2 billion.

The acquired assets include Celsius Network’s institutional loan portfolio, staked cryptocurrencies, mining units, and other alternative investments.

This acquisition comes almost a year after Celsius initially filed for Chapter 11 bankruptcy in July 2022, signaling a potential resolution for the troubled lending company.

As the case unfolds, it will likely shed light on the broader issues of market manipulation and investor protection within the crypto ecosystem, underscoring the need for stricter regulatory oversight and robust control mechanisms to safeguard investors’ interests.