US prosecutors subpoenaed Celsius Network just days after the now-bankrupt crypto lender froze customer withdrawals in June in one of a range of federal inquiries surrounding the company.
The subpoena was issued on June 15, the lender disclosed in a Manhattan bankruptcy court filing last week. Celsius had halted withdrawals three days earlier, trapping the savings of hundreds of thousands of customers.
The court filing said the subpoena was issued by a federal grand jury in Manhattan. Federal grand juries are used by Department of Justice prosecutors when conducting criminal investigations and can potentially issue indictments.
The subpoena is a sign of the intense scrutiny that Celsius has faced this year as the once major crypto lender crumbled during a sharp sell-off in cryptocurrency assets.
Celsius took in crypto assets and lent them out, promising customers eye-popping returns it generated through deploying the tokens in digital asset markets. At peak it held $25bn in customer crypto assets. The business filed for bankruptcy in July owing $5.5bn but holding assets worth only $4.3bn.
The details of what the subpoena demanded are not disclosed in the October 5 filing. The subpoena was included in a list of “regulatory agency inquiry or action[s]” as a broader disclosure of the company’s financial affairs.
Celsius said: “We are co-operating with all regulatory inquiries, and regulators are key stakeholders in our reorganisation. We are not commenting as to the specific details of any inquiries.”
A lawyer for former Celsius chief executive Alex Mashinsky, who stepped down last month, had no comment as the subpoena was not issued to him. The Manhattan US attorney’s office declined to comment.
The bankrupt crypto lender is grappling with inquiries from several other federal agencies, court filings show. They include the Securities and Exchange Commission, Commodity Futures Trading Commission and the Federal Trade Commission. The three agencies conduct civil rather than criminal investigations.
The CFTC inquiries are described as relating to “fraud and other unlawful conduct with respect to digital asset transactions” and separately “certain trading activities involving TerraUSD (UST) / Luna”.
UST and Luna were a pair of interrelated tokens that collapsed in May, sparking a wave of subsequent insolvencies across the crypto industry. Celsius has said it avoided significant losses on its UST and Luna trading by exiting its trades as the tokens collapsed.
The DoJ, CFTC and FTC inquiries have not been previously reported. The Financial Times revealed in July that the SEC had requested records from Celsius regarding certain trades made by its top executives. Bloomberg reported in January that the company had been caught up in a broader investigation by the SEC into crypto lenders.
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