Celsius Network: The Safety Pitch and the Books Behind It

The Celsius Network CFTC fraud case alleged a pooled crypto-lending scheme that attracted approximately $20 billion in customer deposits with promises of bank-like safety and high returns while putting customer assets into increasingly risky investments. Inside the business, the government’s complaint alleges reward payments that outgrew revenue, assets the company could not properly reconcile, and employees editing public broadcasts to remove statements they knew were wrong. Someone handling those books or those edits could see what the sales pitch concealed.

The Commodity Futures Trading Commission sued Celsius Network and its former chief executive over alleged conduct beginning in 2018 and continuing through June 2022. The company agreed to a permanent injunction. The former chief executive later admitted a civil fraud count in a separate settlement within the same action.

Celsius CFTC Customer Asset Safety Representations

Celsius’s customer asset safety representations promised that customers could earn high yields while the company kept their crypto safe. Its Earn program advertised returns as high as 17% a year and promised weekly payments. Customers were told the loans behind those returns went to reputable borrowers and were backed by more collateral than the amount lent.

The bank comparison supplied the sales argument. According to the complaint, Celsius claimed it returned up to 80% of revenue to customers, presenting itself as a more generous alternative to banks. Yet the Commission alleged that customer reward rates were never based on lending yield or other asset-deployment revenue. In responses to regulators, the company itself described customer returns as unconnected to that revenue.

The alleged message encouraged people to deposit assets and persuaded existing customers to leave them there. The complaint also alleged that Celsius exaggerated its token-sale proceeds and active customer numbers. By June 17, 2022, it had 584,192 registered U.S. users, but 386,294 held less than one dollar in their accounts, according to the complaint. Registered users made the platform look busy. Their balances told a different story.

How the Celsius Pool Used Customer Assets

The Commission alleged that Celsius pooled customers’ digital assets and deployed them into institutional and retail loans, futures trading and other revenue-producing activities. Returns from those investments were supposed to fund customer rewards, with the remainder available as company profit. Longer-term investments also required Celsius to retain enough accessible capital to meet withdrawals.

That flow explains the commodity-pool allegations. A commodity pool brings together assets for trading commodity interests, including futures. Here, the Commission alleged that Celsius operated the Celsius Pool without registering, while its chief executive solicited participants without registering himself.

The complaint also alleged that Celsius failed to give prospective participants the required pool disclosure documents. Those documents would have addressed risks, fees, expenses and past performance.

The Commodity Futures Trading Commission had already described the difficulty of following crypto activity across markets in its fiscal year 2021 budget request, published in 2020. It warned that fraud and manipulation could cross multiple exchanges, including cash exchanges over which its authority was limited. Celsius’s alleged use of loans, futures and decentralized finance shows why the customer-facing account was only the beginning of the asset trail.

High Rewards, Riskier Loans and DeFi

The complaint alleged that Celsius kept reward rates high even when its investments could not earn enough to cover them. The chief executive feared customers would move to competing platforms. His response, according to the CFTC, was to chase higher yields through riskier investments.

The numbers show how far the promise had outrun the business. The Commission alleged that reward obligations exceeded net revenue by approximately $1 billion in 2021 and $380 million in the first half of 2022. It also alleged that, dating back to 2020, Celsius used customer assets to pay operating expenses and rewards while failing to track assets and liabilities adequately, coin by coin. We see the absurdity in that combination: a company selling safety allegedly could not properly reconcile the assets it was promising to keep safe.

Collateral Claims Met the Loan Book

Customers heard that Celsius avoided unsecured lending. The complaint describes a different account inside a May 2022 board meeting: 47% of institutional loans were unsecured, valued at $1.492 billion. The chief executive attended that meeting, according to the complaint.

Collateral matters because it gives the lender something to retain or sell if the borrower defaults. A statement that loans are fully backed can be compared with the collateral actually held for each borrower. The board materials also connect the lending figures to what senior management knew.

DeFi Became the Largest Deployment Category

Decentralized finance uses smart contracts to carry out transactions on a blockchain. The complaint explains that these arrangements can automatically liquidate collateral when its value falls below a specified threshold. It also describes losses from hacks and from assets becoming inaccessible through a third-party service.

By May 25, 2022, the complaint alleged, nearly 30% of customer digital assets were deployed in DeFi, compared with about 11% in retail lending and 12% in institutional lending. DeFi had become Celsius’s largest deployment category while the chief executive continued to play down its importance.

The complaint gives a concrete example of the custody problem: Celsius allegedly lost access to 35,000 Ether in June 2021, never recovered it and did not disclose the loss to customers. For someone reconciling wallets and balances, whether the company could still access an asset was part of whether the balance represented anything it could use.

Liquidity Assurances Before the Withdrawal Freeze

The Commission alleged that Celsius continued to assure customers their assets were available even as its liabilities exceeded its assets. In a May 13, 2022 broadcast, the chief executive said:

For that same date, the complaint put Celsius’s net assets at negative $820 million. The company continued soliciting deposits. The government’s account then describes where new deposits were going:

Between June 10 and June 12, Celsius received $428.3 million in withdrawal requests it could not meet, according to the complaint. It froze customer withdrawals on June 12, 2022 and filed for bankruptcy on July 13, 2022.

The Complaint Says Employees Edited Videos After They Aired

The Commission alleged that Celsius assigned employees to edit recorded broadcasts after they aired, deleting problematic statements. Internal emails documented what the chief executive said, when he said it and why it was false. Employees repeatedly told him to stop making certain statements, but he continued.

One example concerned claims that institutional borrowers had never defaulted. The complaint describes a repayment demand, an internal email acknowledging a default and discussion at an assets and liabilities committee meeting. Later, the chief executive again told customers there had been no institutional defaults. The editing team flagged that claim for removal. The alleged assignment was remarkable: fix the recording after the customers have heard it.

Those allegations connect public representations to internal knowledge. The original broadcast shows the claim. The edited version shows what was removed. The email and loan records explain why someone inside the company knew it was wrong.

The Celsius Network Injunction and the Former Chief Executive’s CFTC Settlement

The court entered a permanent injunction against Celsius Network on July 17, 2023. Celsius consented without admitting or denying the complaint’s allegations, except for jurisdiction and venue. The signed company order prohibited further violations of the identified fraud, registration and disclosure provisions and required cooperation with the Commission.

The company order preserved other parties’ ability to pursue remedies in other proceedings and left administration of the bankruptcy estate to the bankruptcy court. It did not itself award customers a recovery or impose a monetary penalty. In his separate settlement, the former chief executive admitted the civil fraud charge. That later order dismissed the separate pool-fraud, registration and disclosure charges against him and imposed permanent trading and registration restrictions.

Can CFTC Prosecute Criminal Violations?

No. The Commodity Futures Trading Commission brings civil enforcement actions. The Justice Department brings criminal prosecutions. In Celsius’s case, the U.S. Attorney’s Office for the Southern District of New York brought the separate criminal action against the former chief executive.

The Justice Department’s charging announcement describes allegations in the criminal indictment that customer deposits funded purchases intended to inflate CEL’s price while executives secretly sold their own tokens. It also announced that Celsius accepted responsibility for its role in the fraudulent schemes under a non-prosecution agreement. The former chief executive pleaded guilty to commodities fraud and securities fraud on December 3, 2024, as the later civil order records.

The Securities and Exchange Commission separately charged Celsius Network Limited and the former chief executive in an action over the Earn offering, investor statements and CEL trading. It alleged unregistered securities offerings and deceptive statements, as well as buybacks intended to support and inflate CEL’s price.

What Evidence Is Required to Prove Fraud?

For the Celsius allegations, the useful evidence connects what customers were told with how their assets were deployed, what the company owed and who knew the difference. We examine reward-rate decisions against earned revenue, loan files against collateral claims, and withdrawal requests against the assets available to satisfy them. Original broadcasts, edited copies and internal explanations can connect a public statement to the people who knew it was false.

The 2022 GI-ACE report Merchants of Integrity? Commodity Trading and Corruption Research for a World in Transition explains a limit of the blockchain trail:

That is why an insider’s explanation can add something a transfer alone does not show. We connect wallet movements and futures-account records with the company ledgers, instructions and people controlling them. A treasury employee may understand a deployment. An accounting employee may understand the missing reconciliation. Someone handling customer communications may understand the deleted assurance.

The relevant knowledge can also come from customers, investors and other market participants. We work with you to identify what your part of the business reveals and where it connects to the rest of the evidence.

FTX Shows Why the Asset Trail Matters

FTX supplies a parallel in the gap between a customer balance and the assets behind it. The findings in its CFTC entity consent order describe supposedly safeguarded customer assets diverted and mixed with assets at Alameda, which enjoyed undisclosed privileges.

The common question is who actually controlled the assets and what they used them for. At Celsius, the complaint’s lending, accounting and withdrawal allegations give that question specific places to look inside the business. Knowing the reason behind a transfer or an unreconciled balance can explain a discrepancy that the customer-facing account conceals.

Can I Get Paid for Being a Whistleblower?

A qualifying CFTC whistleblower award can pay a share of the monetary sanctions collected. The CFTC program’s statutory range is 10% to 30%, shared among qualifying whistleblowers in the action. Awards can also draw on collections in qualifying related actions based on the same information. We assess the information you hold, the connected actions and the award opportunity with you.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. That separate program’s range is described in the International Labour Office’s 2019 study, Law and Practice on Protecting Whistle-Blowers in the Public and Financial Services Sectors.

You Know What the Safety Pitch Left Out

If you know why a crypto platform’s lending records, reward payments or withdrawal queues contradict what customers were told, talk with our whistleblower experts about the discrepancy. We build the case with you and bring in CFTC whistleblower lawyers who understand pooled assets and trading records. From the first explanation of the books through the award claim, you have us beside you.