Celsius creditors changed their lawsuit this week against the bankrupt cryptocurrency lender. New accusations are that Celsius executives have commissioned algorithmic trading firm Wintermute to take part in ‘wash trading’. The lead plaintiffs in the putative class action against Celsius also added Wintermute Trading Ltd as defendants.
Celsius creditors accuse cryptocurrency firm of ‘wash trading’
After its collapse last year, some senior executives at Celsius have faced fraud charges. For example, the New York Attorney General sued Alex Mashinsky, co-founder of Celsius Network, for defrauding investors. The latest charges affect a class action lawsuit filed on behalf of anyone who suffered losses by purchasing Celsius Financial Products through a Celsius Earn Rewards Account.
At the center of the plaintiffs’ allegations is the allegation that Celsius used fraudulent tactics to raise the price of the CEL token. The lawsuit alleges Celsius and its administration improperly manipulated the CEL token price. Accordingly, they used the proceeds from investor deposits to purchase CEL tokens. Thus, they increased their Net Position in CEL. In the amended filing, Celsius’ creditors added “wash trading” to the list of charges against the bankrupt firm.
Wash trading is a type of market manipulation in which a person buys and sells the same financial instruments at the same time. This operation artificially inflates market activity without the trader himself being exposed to any risk or changing his market position.
FTX entangled in suspicious Celsius transactions
As we reported on Kriptokoin.com, in April, the top 10 wallet holders suspected of FTX’s CEL price manipulation were subpoenaed. The move came as creditors identified suspicious transactions shortly after Celsius stopped withdrawals before its collapse. The court order was issued as part of Celsius’ bankruptcy proceedings. Accordingly, the court asks defendants to clarify the 950 CEL transfer that appears to be ‘wash trading’ between self-custody and FTX wallets.
Wintermute makes a name for herself in Celsius case
In their latest court filing, plaintiffs note the time span from March 2021 until Celsius freezes their withdrawals in June 2022. In this context, they underline the following claim:
The Enforcement Defendants actively engaged Defendant Wintermute to engage in improper market-making through ‘wash trading’.
The document in question refers to a January 2023 report on Celsius’ bankruptcy. The document states that senior Celsius executives have agreed with Wintermute to facilitate wash trading of CEL tokens. Wintermute is a London-based technology company that operates an algorithmic trading platform. Its services are used by various crypto exchanges and market makers to provide digital asset liquidity.
Massive cryptocurrency flows between Celsius and Wintermute
The exact role Wintermute plays in Celsius’s liquidation is unclear. That said, there has definitely been a massive influx of cryptocurrencies between the two organizations. This happened both before and after Celsius filed for bankruptcy in July 2022. In October, the Twitter account spotted a series of transactions involving Mikeburgersburg, Celsius and Wintermute.
Prior to its bankruptcy, Celsius transferred approximately $160 million worth of Bitcoin to third-party wallets. Among them were several addresses that Wintermute reportedly checked. Meanwhile, Arkham Intelligence reported that in May Celsius moved approximately $20 million worth of WETH to a Wintermute wallet. Meanwhile, after the recent accusations, Wintermute denied all the allegations.
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