Welcome to our Celsius Network, in which we investigate the website currently found at celsius.network.
On March 22nd, 2023, one of our partners received the following complaint from a visitor who claims being scammed for $3,000:
I lost $3000 USD of my hard-earned money with Celsius Network. Despite being their customer for 3 years, I couldn’t withdraw any funds or saved cryptocurrencies.
Last year, in May, I learned that Celsius Network was bankrupt and had paused all withdrawals. Now, they are sending me letters saying that I should accept their bankruptcy and won’t get my money back. I feel cheated and deprived of my money.
So is Celsius Network a SCAM?
Celsius Network Review
When we open celsius.network we indeed encounter a message that they went bankrupt. They write that the website is currently being updated due to the recent bankruptcy filing of Celsius and some of its affiliates. As a result, certain services and features may not be available on the site.
The domain celsius.network was registered on August 22, 2017 by Governing Dynamics from New York, USA. It is hosted by Amazon.com, Inc on behalf of Vercel, Inc.
According to SimilarWeb, celsius.network has a global rank of #219,724, #55,199 in the USA, and category rank of 816 for Finance > Finance – Other in the United States. It has had 209,000 total visits in March 2023, mainly by Americans, but also by people from Canada, UK, Malaysia, India, and other countries.
It is a cryptocurrency app that offers various services such as buying, swapping, earning, borrowing, and sending with zero fees. It allows users to earn up to 17% APY and get 1% APR crypto-backed loans.
According to Celsius.network, this digital asset lending platform has received awards and recognition for its innovative crypto lending and its commitment to transparency.
The platform has over 1.7 million users, and as of June 2022, has paid 5,100 BTC and 83,332 ETH to its community.
Get in touch with our affiliated Cryptocurrency Forensic Specialists at CNC Intelligence for free by filling out the form below.
However, as of the time of writing, withdrawals, swaps, and transfers between accounts are currently paused.
The domain celsius.network has a Semrush Authority Score of 47. It has 188.5K backlinks from 17.3K referring domains, including from highly authoritative websites such as apple.com, forbes.com, google.com, nytimes.com, theguardian.com, and others.
So clearly, celsius.network is not a scam, but a legitimate website. The question remains, did it engage in fraudulent practices and perhaps that led to its demise?
From Wikipedia we learn that Celsius Network is a cryptocurrency lending company that filed for bankruptcy in July 2022. The company allowed users to deposit various cryptocurrencies into a Celsius wallet to earn interest and take out loans by pledging their cryptocurrency as collateral. Celsius generated revenue from token sales, lending, bitcoin mining, and discretionary trading of cryptocurrencies, but did not charge any fees to its users.
In June 2022, the company indefinitely paused all transfers and withdrawals due to extreme market conditions, which resulted in steep declines in the price of bitcoin and other cryptocurrencies.
Celsius had been accused of running a Ponzi scheme and of having regulatory issues.
Based on the website that Celsius Network refers us to to learn about their bankruptcy, Celsius Network LLC and its affiliates filed for relief under Chapter 11 of the United States Bankruptcy Code.
There are notices of phishing attempts and how to report them. The law firm Kirkland & Ellis LLP, who are legal advisors to the Debtors in the Chapter 11 case of Celsius Network LLC, has issued a notice warning of phishing attempts that have been made against some of the Debtors’ customers.
The phishing emails purport to be from Kirkland & Ellis and request that customers submit their wallet addresses and other account information to receive claim distributions.
The notice makes clear that these emails are not authorized messages from the Debtors’ legal advisors and are likely a phishing scam.
Customers are warned not to provide any personal information unless they receive an order from the court and are asked to contact the Debtors or their claims agent if they receive any suspicious messages.
Celsius Network Reviews
An investigation into cryptocurrency lender Celsius has found that the company was insolvent since its inception and its collapse was not just due to the falling price of Bitcoin. The investigation found that Celsius’s failure was intrinsic to its business model, which promised customers 17% annual yields on their deposits.
The report suggests that Celsius used customer deposits to buy and prop up its native cryptocurrency, CEL, while selling their individual stakes in the coin for profit. The report has raised questions about whether Celsius was operating as a Ponzi scheme, but did not explicitly say if it met the criteria for such a scheme.
Also, according to the Financial Times, Alex Mashinsky, founder of this cryptocurrency lender, has been sued for fraud by the New York Attorney-General, who alleges that he defrauded hundreds of thousands of investors and violated securities laws. The suit claims that Mashinsky misled investors and concealed the fact that Celsius was engaged in risky investment strategies.
The observer.com reports that New York State attorney general Letitia James has filed a lawsuit against former Celsius founder and CEO Alex Mashinsky, alleging that he defrauded tens of thousands of customers by promising them unrealistic returns on their investments while investing their money in highly risky activities that were never disclosed.
On Forbes an article was published which explains that Alex Mashinsky, the founder and former CEO of Celsius Network, has been sued by the state of New York for allegedly engaging in a scheme to defraud investors by offering loan products with yields of up to 17% and “minimal risk.”
The lawsuit alleges that Mashinsky made false promises about generating high returns by making low-risk collateralized loans to institutions and cryptocurrency exchanges, but moved into riskier investments as the company grew.
The suit seeks unspecified damages and restitution to investors, and also seeks to ban Mashinsky from working in the investment business in New York.
Celsius filed for bankruptcy in July 2022 with over $1bn in debt, and in October of that year, the Financial Times reported that Mashinsky withdrew $10m from the platform just weeks before customer accounts were frozen.
According to davidgerard.co.uk, Celsius Network, a cryptocurrency investment platform, has been exposed as a Ponzi scheme by the court-appointed examiner in the company’s bankruptcy case. The report shows that the company was never profitable, even manipulating its own token price, and was insolvent from the beginning. Celsius struggled to pay rewards and used new customer deposits to fund withdrawals, with no proper financial controls.
The company lost millions in bad investments and loans, and its CEO ignored warnings and lied to customers. Celsius owes $5.5 billion to clients and creditors, with a $1.2 billion hole in its books. The company has never registered with the US Securities and Exchange Commission, despite claiming that it had.
Some commenters expressed skepticism that employees did not know what was going on and suggested that they may have been complicit in the illegal activity. Others pointed out that there may not have been enough positive incentive for employees to blow the whistle, and that negative incentives like jail time may be needed to encourage whistleblowing. One commenter compared the situation to the Madoff scandal, in which programmers were also sent to jail.
What about actual users of the platform? On TrustPilot they have a TrustScore of 3.5 out of 5. Out of 1,716 reviews, 63% of them are 5-star ratings.
Customer reviews of Celsius Network from various countries in August and September 2021 are mixed. Some customers praise the customer service, rewards program, and ease of use, while others complain about delays in responses, lack of live support, app freezing, regulatory restrictions, expensive cost of buying cryptocurrency, limited transfer options, and technical and account issues such as frozen accounts.
The investigation into Celsius Network shows that it is not a scam but a legitimate website that filed for Chapter 11 bankruptcy in July 2022.
The company allowed users to deposit various cryptocurrencies into a Celsius wallet to earn interest and take out loans by pledging their cryptocurrency as collateral. Celsius generated revenue from token sales, lending, bitcoin mining, and discretionary trading of cryptocurrencies but did not charge any fees to its users. However, Celsius’s failure may have been intrinsic to its business model, which promised customers 17% annual yields on their deposits.
The report has raised questions about whether Celsius was operating as a Ponzi scheme, but did not explicitly say if it met the criteria for such a scheme.
Additionally, the founder of Celsius Network, Alex Mashinsky, has been sued for fraud by the New York Attorney-General, who alleges that he defrauded hundreds of thousands of investors and violated securities laws.
Based on this information, potential investors should exercise caution and conduct thorough research before investing in Celsius Network.
If you have fallen victim to online scams, please comment below. If you have suffered a substantial financial loss, do not despair. We are here to assist you in recovering your funds!
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