Celsius Lenders Allege Wintermute Helped Firm In Wash Trading

Celsius Lenders Allege Wintermute Helped Firm In Wash Trading

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Creditors of bankrupt crypto lender Celsius have amended their lawsuit to include Wintermute, alleging that the firm assisted executives of the lending firm by facilitating wash trading and fraudulently manipulating trading volumes. 

Wintermute Caught In Legal Quagmire 

According to the new court filing, Wintermute Trading Ltd has been added as a new defendant in the ongoing class action lawsuit against Celsius Network. Celsius creditors recently amended the lawsuit filed in the United States District Court for the District of New Jersey, alleging that executives from the bankrupt crypto lender had engaged Wintermute to facilitate wash trading and inflate the trading volume on the platform. According to the filing, this was done between March 2021 and June 2022, when the firm froze withdrawals. Wash trading is a type of market manipulation where a company creates the illusion that an asset is trading at a higher volume than it actually is. 

“Defendant Wintermute and the Executive Defendants engaged in a scheme that artificially inflated the trading volume of the CEL tokens sold and marketed by Celsius.”

The filing also stated that the alleged scheme was discovered through publicly available internal conversations between executives from Celsius. Furthermore, it was also reported that Celsius did not have any measures to prevent improper or malicious wash trading. 

“The supposed controls were virtually non-existent, and those that did exist did not monitor for or protect against “wash trading” or self-dealing.”

Before it filed for bankruptcy, Celsius allegedly transferred $160 million of wrapped bitcoin to third-party wallets. It is alleged that Wintermute controlled several of these wallets. According to blockchain intelligence firm Arkham, Celsius also ended up moving around $20 million worth of wrapped Ethereum (WETH) into a Wintermute-controlled wallet. Wintermute itself was caught up in a hacking fiasco in September 2022, when the protocol suffered a breach and ended up losing around $160 million across 90 assets held in the company’s portfolio. Following the hack, the Wintermute CEO had to reassure users, lenders, and partners that the company remained solvent. 

Fahrenheit Acquires Celsius Assets 

The developments come after it was reported that Celsius assets had been acquired through an auction. According to reports published on the 25th of May, crypto consortium Fahrenheit had acquired the Celsius assets after a successful bid. The assets were previously valued at $2 billion. As a result of the successful bid, the Fahrenheit consortium acquired Celsius Network’s staked cryptocurrencies, institutional loan portfolio, mining units, and several other alternative investments made by the lender. The acquisition comes nearly a year after Celsius filed for Chapter 11 bankruptcy in July 2022. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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