Analysis
Fraud and market manipulation behind Crypto Bank-Run
Coming in 2025, we find ourselves riding a cryptocurrency tailwind, with Bitcoin $ 100K, Mica coming to the European Union, and there are many new initiatives declared under the new US administration. I thought to reflect one of the biggest crypto collapse of 2022, Crypto, former “banks” of the Celsius Network, whose ex-CEO recently made multi-arab-dollars fraud and market manipulation schemes Busted to guilty.
This was one of the biggest crypto collapse we viewed, with $ 4.7 billion crypto assets frozen from investors when they suddenly stopped all withdrawal. While its slogan proved to be an irony “uninterrupted itself” when it appeared that Celsius succumbed to a general bank-run after Luna’s collapse, Department of Justice (DOJ), US Securities and Exchange Commission (SEC) , And the parallel check by the American Commodity Futures Trading Commission (CFTC) later revealed that a lot of below the surface was happening.
Rise and Fall of Celsius
Before the fraud and dive into the market manipulation, let’s take a quick look at the rise and collapse of Celsius. According to his stored website, which acts as a window in the 2020 Crypto Landscape, it all began in 2017 on a coffee napkin. This developed in a crypto asset platform that would detain customer crypto assets and allow them to earn or take returns on those assets or allow them to take them. Reserved loan by them. The main attraction of the platform was the “earning” program, which allowed Celsius to invest the customer’s assets and reached a point of offering a yield of up to 18%. By 2021, Celsius was estimated at $ 25 billion in assets; However, the CFTC filing later suspected that number.
All this crashed in spectacular fashion in June 2022. The collapse of the last month’s Terroad-lunas snatched the market, causing frequent rumors of liquidity issues and investment losses for Celsius. These rumors were rejected by June 13, when Celsius suddenly stopped all customers withdrawals. A month later, the company filed for bankruptcy, revealed a large -scale hole in its balance sheet and was $ 4.7 billion of 600,000 unprotected depositors. At that time most of the comments chalk it for a classic bank-run; However, the next year DOJ, SEC and CFTC investigation shows that people were having a lot behind the curtain compared to realizing.
“No hope … no plan”
The DOJ case, which had a guilty petition last month, revealed two examples of fraud in the earlier timeline. First, most businesses and risks were incorrectly presented. While we will not go through all false statements, the summary is clear: you were not getting a low risk 18% return. Shocking The CFTC case increases a very intensive in a very intensive manner. From “we have no profitable service” in SEC filing, the current business model is not financially sustainable “to incredibly Stark” is no hope … no plan. ”
Pull a ownership tokens
The second part of the case revolves around manipulation in the market, which is slightly more complicated. The manipulation is related to the Celsius Crypto token cell, and what it is interesting to be achieved. A portion of interest (or award) was paid to investors in CEL, giving it interest to maintain the price of CL at a higher level in the interest of Celsius. CEL was also traded on secondary markets, and the public perception of business success was associated with the success of CEL token. An employee wrote that the price of “high” CL, “more people understand that Celsius is a legal company and customers will get it.”
Celsius raised the price in some ways. First, it used the company’s funds, including depositors funds to buy CEL. SEC filing suggests that more CEL was purchased than required for payment of interest and prizes.
Celsius employees also prepared a plan to help the funds and use their OTC desk to hide the activity. Transactions on Celsius platforms were only reflected in internal records, not for other users on blockchain or on platforms. The SEC filing stated, “Celsius will sell CL through non-public OTC desk, and will use income to divert and re-reverberate CL through public means and promote its price.”
This Cel will then be sold back to the non-public OTC desk. In some circumstances, Celsius will give strategically time of activity, where its public purchase will increase confidence and will have sufficient price for its non-public OTC sale to earn a significant profit.
This case is a great example of many layers of fraud and mismanagement that may be present in a company. At its top, the manipulation part reflects unique challenges and risks that arise when the platforms release and run their own tokens. These are challenges that we need to ensure to address in the new Crypto Wave.
Capital market regulatory update
21 January: Second Announced that President Trump made Mark T. Uyda was nominated as the acting chairman of the SEC, where he has served as a commissioner since 2022 and has played various roles since 2006. Uyada was recently confirmed for a five -year term by 2028, and has expressed commitment, and expressed commitment, and expressed commitment, and expressed, and committed, and committed, and commitment Expressed, and expressed commitment, and expressed commitment, and expressed commitment, and expressed commitment, and commitment. For the SEC mission to protect investors, maintain fair markets and facilitate capital formation.
21 January: Second Acting President Mark T. Uyada established a new Crypto Task Force to develop a clear regulatory guideline for crypto assets, moving away from the previous enforcement-centered approach of the SEC. The task force aims to create a practical registration path and intelligent disclosure structure by coordinating with other regulatory bodies and collecting inputs from various stakeholders.
January 20: Members of CFTC Commissioner Caroline D. unanimously as an acting chairman. Foams were elected. The purpose of the acting president Fam is to change and change direction with new leadership with new leadership to complete the statutory mandate of CFTC to promote innovation and fair competition responsible in our markets that have developed continuously for decades.
17 January: federal Reserve Board Announced its return from the network of central banks and supervisors to defeat the financial system (NGFS).
17 January: Autorité des Markés Financiers (AMF) Declared their action and supervisory priorities for 2025, which align with their ‘influence 2027’ strategic plan and focus on 13 priority tasks in six strategic fields including market supervision, investor protection and permanent finance.
16 January: Bermuda Monetary Authority (BMA) Released its 2025 business plan, underlining commitments to increase regulatory structure and ensure operational efficiency, focusing on green initiative, digital innovation and customer security.
15 January: World Economic Forum (WEF) Published the 20th edition of its global risk report, revealing a rapidly fragmented global landscape, where there is a threat to growth stability and progress in geopolitical, environment, social and technical challenges.
Fines and enforcement operations
Regulatory division of Bores de Montreal Inc. (“Bors”) fined a financial services firm to over $ 113,000 $ 113,000 $ 8,000 to allow unauthorized access to nine employees between 2019-2023.
Hong Kong Independent commission against corruption (ICAC) accused a former Associate Director of SFC after the former Associate Director allegedly recommended the manipulation of manipulations in the market and destroying the evidence.
the UK Financial conduct authority (FCA) fined Ariane Financial LLP £ 288,962.53 for insufficient financial offenses. The case marks the seventh enforcement action in relation to co-e-X trading by the FCA, the total fine is now more than £ 22 million.
CFTC In 2017, the US district court ordered a fine of $ 5 million to make a wrong or misleading statement about the bitcoin futures contract certification.
CFTC It was announced that the Florida district court entered the final default decisions against the Mosaic Exchange Limited and its CEO, running a fake digital asset scheme, which cheated 18 persons. The defendants were ordered to pay approximately $ 1.2 million in joint punishment and restoration and permanently banned from CFTC-regulated markets.
Second A final decision was obtained against a former Fizer Statisticalist and their business partner. Individuals were found guilty of insider trading after earning a profit of $ 214,395 and $ 60,300 respectively before the Paxlovid announcement of the Fizer in 2021.
Second Nine investment advisors and three broker-dealers were accused of violating and paying a joint penalty of $ 63.1 million to fail to maintain and preserve electronic communication.
Second Due to insufficient monitoring and investigating suspected trading activity from their customers, Broker-Dealers Speedrout LLC was charged to fail to file a suspected activity report (SARS) between 2020–2023. Without accepting or rejecting the conclusions, Speedrout agreed to pay a fine of $ 600,000 and censored by SEC to violate the Exchange Act requirements.
Second Announced that Robinhood Securities LLC and Robinhood Financial LLC agreed to pay $ 45 million in joint civil punishment to settle several regulatory violations, including suspected activity reporting, identity security, cyber security and records requirements In included failures.
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