Celsius, FTX feels investors’ wrath as lawsuits multiply
The stunning collapses of Celsius and FTX ruined many lives – early adopters who had the foresight to understand the unique value propositions of Bitcoin (BTC) and crypto were left with virtually nothing as both platforms stopped withdrawals, closed their doors and ultimately filed for bankruptcy. While there is still hope that creditors will be made partially whole again, the road to recovering financial losses is expected to be long. While they wait, creditors band together to sue these firms for various alleged violations.
This week’s Crypto Biz delves into recent lawsuits against Celsius co-founder Alex Mashinsky and several venture capital firms that backed FTX during previous investment rounds. We also survey the latest news surrounding the United States Securities and Exchange Commission (SEC) and conclude with a positive comment on a potential blockchain use case.
Celsius creditors committee proposes to sue Mashinsky, other Celsius executives
Once the darling of yield-seeking crypto investors, bankrupt lending platform Celsius is being accused of “fraud, recklessness, gross mismanagement and self-interested conduct” by former clients. In a complaint filed in bankruptcy court on Feb. 14, lawyers representing Celsius’ creditors proposed suing co-founder Alex Mashinsky and other former executives for such wrongdoing. “Mr. Mashinsky, Mr. Leon, Mr. Goldstein, Mr. Beaudry, Mrs. Urata-Thompson and Mr. Treutler breached their fiduciary duties to Celsius,” the lawyers wrote of Celsius’ executives. “These parties were aware that Celsius promised the customer’s interest payments that they couldn’t afford and did nothing to fix the problem.” It looks like Mashinsky’s problems have only just begun.
Sequoia Capital, Paradigm Among VCs Facing “Difficult” FTX Investor Lawsuits
Customers of bankrupt crypto exchange FTX are turning their attention to the platform’s financiers and promoters to recoup some of the huge losses they have incurred. According to Bloomberg, FTX users have filed a class-action lawsuit against venture capital firm Sequoia Capital and private equity firms Thoma Bravo and Paradigm — all three firms involved in FTX’s massive $900 million Series B round in July 2021. Meanwhile, a separate class action lawsuit filed in California on Feb. 14 alleged that Silvergate Bank and its CEO Alan Lane were responsible for “aiding and abetting” Sam Bankman-Fried in carrying out his fraud. It appears that FTX’s venture capital and business backers are about to feel the backlash of the exchange’s failure.
SEC to Target Crypto Firms Operating as ‘Qualified Custodians’ – Report
The US was always meant to be a bedrock of innovation and first-mover advantage. When it comes to crypto, however, regulators are coming down with an iron fist. In addition to stablecoins and staking protocols, the SEC is reportedly looking at “qualified custodians” in its regulatory guidance and enforcement actions. According to Bloomberg, the SEC is working on a proposal that would make it difficult for crypto companies to serve as “qualified custodians” on behalf of clients. In practice, this may deter hedge funds and private equity funds from continuing to work with crypto custodians.
Siemens issues $64M digital bond on a public blockchain
Blockchain’s use cases may have expanded to bond offerings after German engineering company Siemens issued a digital bond using distributed ledger technology. On February 14, Siemens revealed that it sold digital bonds worth $60 million directly to investors, which included DekaBank, DZ Bank and Union Investment. The company said blockchain-based bonds have several advantages compared to traditional bond sales. “For example, it makes paper-based global certificates and central clearing unnecessary,” Siemens said. “Also, the bond can be sold directly to investors without a bank needing to act as an intermediary.” It is important to note that the bonds were still paid for using traditional methods because the digital euro is not yet available.
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