Celsius creditors have amended their lawsuit against the bankrupt crypto lender this week. New accusations allege that Celsius executives engaged the algorithmic trading firm Wintermute to take part in wash trading.
In a document filed on June 19th, the lead plaintiffs of a class action lawsuit against Celsius have now added Wintermute Trading Ltd as a defendant.
Celsius Creditors Accuse Executives of Wash Trading to Prop up CEL
In the wake of its collapse last year, several senior executives at Celsius have been subject to accusations of fraud.
For example, the co-founder of the Celsius Network, Alex Mashinsky, is being sued by the New York Attorney General for defrauding investors.
The latest accusations affect a class action lawsuit brought on behalf of all people who suffered losses from purchasing Celsius Financial Products through a Celsius Earn Rewards Account.
Central to the plaintiff’s allegations is a claim that Celsius used fraudulent tactics to prop up the price of its CEL token. The lawsuit alleges that Celsius and its management engaged in the improper manipulation of the price of the CEL token. For example, by using the proceeds of investor deposits to acquire CEL tokens and increase its Net Position in CEL.
In the amended filing, Celsius’ creditors have added “wash trading” to the list of charges against the bankrupt firm.
Wash trading is a form of market manipulation in which someone buys and sells the same financial instruments simultaneously. This artificially inflates market activity without the trader themselves having incurred any risk or changing their market position.
FTX Embroiled in Suspicious Celsius Transactions
In April, BeInCrypto reported that subpoenaed FTX revealed the names of the 10 largest wallet holders suspected of CEL price manipulation.
The move came as creditors identified suspicious trades shortly after Celsius paused withdrawals ahead of its collapse. A court order granted as part of Celsius’ bankruptcy proceedings seeks clarity over 950 CEL transfers that appear to suggest wash trading between self-custody and FTX wallets.
Wintermute Named in Celsius Lawsuit
In the recent court filing, the plaintiffs state that from March 2021 up until Celsius froze withdrawals in June 2022:
“the Executive Defendants actively engaged Defendant Wintermute to engage in improper market making via the use of wash trading.”
Citing a January 2023 report into the Celsius bankruptcy, the document states that senior Celsius executives engaged Wintermute to facilitate the wash trading of CEL tokens.
Wintermute is a London-based technology company that operates an algorithmic trading platform. Its services are deployed by a variety of crypto exchanges and market makers to provide digital asset liquidity.
Large Volume of Crypto Flows Between Celsius and Wintermute
The exact role Wintermute played in Celsius’ liquidity provision is uncertain. However, a large volume of cryptocurrency has certainly flowed between the two entities. This has been the case both before and since the latter filed for bankruptcy in July 2022.
In October, the Twitter account @Mikeburgersburg identified a string of transactions involving Celsius and Wintermute.
In the run-up to its bankruptcy, Celsius transferred around $160 million worth of wrapped Bitcoin to third-party wallets. Among these were several addresses reportedly controlled by Wintermute.
Meanwhile, Arkham Intelligence reported in May that Celsius had moved roughly $20 million worth of WETH into a Wintermute wallet.
In the wake of the latest accusations, Wintermute has denied all wrongdoing.
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