Creditors of the bankrupt crypto lending firm, Celsius Network, have amended their class-action lawsuit to include algorithmic trading firm, Wintermute. The plaintiffs now allege that Wintermute aided Celsius in wash trading, an illegal activity where the same crypto or security is sold and bought to generate misleading market information. The latest court filing shows Wintermute Trading Ltd as a new defendant in the ongoing lawsuit, which alleges that Celsius executives engaged in “improper market making” activities with the help of Wintermute from March 2021 until June 2022 when the crypto lending firm froze withdrawals.
The new allegations in the lawsuit directly affect the people who suffered losses from purchasing Celsius Financial Products through a Celsius Earn Rewards Account and subsequently filed a class-action lawsuit against the firm. The latest court filing alleges that Celsius CEO Alex Mashinsky and other executives manipulated CEL prices through wash trading with the assistance of Wintermute.
Before filing for bankruptcy, Celsius reportedly transferred nearly $160 million worth of wrapped Bitcoin to third-party wallets. Several of those addresses are reportedly controlled by Wintermute. Celsius also moved roughly $20 million worth of WETH into a Wintermute wallet in May, according to blockchain intelligence firm Arkham.
The alleged wash trading accusations were found through “publicly available internal conversations” between Celsius executives, according to the filing in the ongoing lawsuit in the United States District Court for the District of New Jersey.
With the latest court filing, Celsius’ creditors have now added “wash trading” to the list of charges against the bankrupt firm. The creditors have also alleged that Celsius executives engaged in “improper market making” activities with the help of Wintermute. The addition of Wintermute as a defendant in the lawsuit suggests that the class-action lawsuit against Celsius Network could have wider implications for the crypto industry.
As reported earlier, crypto consortium Fahrenheit won the bid to acquire the assets of Celsius, which were previously valued at $2 billion. As per the bid, Fahrenheit will acquire Celsius Network’s staked cryptocurrencies, mining unit, institutional loan portfolio, and other alternative investments. The crypto consortium will also receive a significant amount of liquid cryptocurrency, estimated to be between $450 million and $500 million.
The addition of Wintermute as a defendant in the ongoing class-action lawsuit against Celsius Network highlights the severity of the alleged wash trading accusations. The lawsuit could have wider implications for the crypto industry if it is found that other firms have engaged in similar activities. The acquisition of Celsius Network’s assets by crypto consortium Fahrenheit is set to proceed despite the ongoing legal proceedings.