Celsius Network, the $ 3 billion “cryptocurrency bank”, is under surveillance again this week after rumors spread that its chief financial officer Yaron Shalem had been arrested for fraud in Israel. The company has received funding and loans from Tether, the issuer of the ubiquitous but struggling USDT stablecoin.
Let’s try again. Very simple question for the CEO of Celsius Network @Mashinsky:
Was your CFO Yaron Shalem recently arrested in Israel for allegations of fraud related to the Moshe Hogeg case?
CC @BrianSozzi, @dee_bosa, @ZekeFaux @matt_levine, @jimcramer
– Nate Anderson (@ClarityToast) November 24, 2021
As of this writing, Shalem’s arrest has not been confirmed in press reports. However, a number of Twitter accounts published the claims separately, one saying Celsius was “about to explode.”
El Salvador suddenly announces that due to the overwhelming demand for volcanic bonds, they will increase the size of the bonds to two billion.
In reality, it’s because Celsius is about to explode, with the CFO shut down. https://t.co/d4RRcxU9Na
– Bitfinex’ed ð¥ ÎÎ±ÏÏÎ¬Î½Î´ÏÎ±ðº (@Bitfinexed) November 24, 2021
Celsius and Tether
The attachment has granted a loan to Celsius Network and was the lead investor in a US $ 30 million funding round in 2020.
Each Tether (USDT) is designed to be worth around US $ 1, and the asset is used as a substitute for the USD on many of the world’s largest exchanges. Its value was allegedly derived from an equivalent ‘real’ US dollar held in Tether’s (the company’s) reserves – but this turned out to be false, and the company also has a habit of losing large sums of money to cause of various misfortunes and seizures.
There are now over 69 billion USDT tokens in circulation. In October 2021, the United States Commodity Futures Trading Commission (CFTC) found that the company’s actual USD reserves were sometimes only 26% of the total in USDT. It hit Tether’s group of companies with $ 42.5 million in omissions and misrepresentation penalties over its USDT backing reserves, saying the “reserves” included unsecured debt and other digital assets.
The Moshe Hogeg Connection
Shalem was previously CFO of venture capital firm Singulariteam Ltd., run by entrepreneur Moshe Hogeg. Hogeg, his firm and associates have been plagued by charges and lawsuits alleging their involvement in a number of fraudulent ICOs. These include LeadCoin and Stox.
In March 2019, Shalem was removed from his post as an accused in one of these cases. Chinese investor Zhewen Hu filed a complaint in Tel Aviv in January 2019 but abandoned the name of Shalem from the list, saying he was not personally responsible for the actions of the company.
Hu then dropped the case after finding a settlement. However, in December 2019 and again in July 2020, Hogeg and Singulariteam Ltd. were sued by US / Canadian investors Sean Snyder and Brad Mills. The alleged prosecutions Hogeg had embezzled funds raised in ICOs and used them to buy an Israeli football team, make a large donation to Tel Aviv University and finance a real estate transaction. They also claimed that some of the money was funneled to Singulariteam.
Stox has been touted as a prediction marketplace (and a token of the same name) running on the Ethereum network. Hogeg himself also claimed to be the victim of a crypto scam, claiming he had funds stolen while attempting to buy GRIN coins in an over-the-counter (OTC) transaction in 2019.
About the Celsius network
Celsius has been called “kind of cryptocurrency bankâHolding 40% of its deposits in BTC and 30% in ETH. What makes it similar to a bank is that its deposits can be loaned out, earning their original holders an annual interest of 5-12%.
This high interest rate has led to allegations that Celsius is exploiting some sort of Ponzi scheme, which his management team has denied. He earns enough money to pay the interest from mining BTC and trading other assets using hedging strategies, they claimed. However, regulators in some jurisdictions have also questioned the company’s practices, with the U.S. state of Kentucky issuing a cease-and-desist order saying it violates securities laws and does not had not disclosed details to clients on the nature of their deposits. Once deposited, digital assets become the property of Celsius.
Rumors surrounding Shalem’s arrest suggested that it was his business with Singulariteam and Hogeg, not Celsius himself. If this is true, however, the effects would trickle down to different connections, at the very least prompting a closer (and much needed) examination of digital asset companies that issue and trade billions of dollars in value.
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