The unwinding of the Celsius Network has been the subject of much speculation in recent months. Many have begun to wonder if it was one giant scam all along.
After the digital currency lending platform filed for Chapter 11 bankruptcy, many who were burned by it, including DeFi platform KeyFi, accused it of operating like a classic Ponzi scheme, using new user deposits to pay yields and enable withdrawals.
Now, a U.S. federal judge overseeing the Celsius case has ordered a formal probe into whether or not the firm was operating like a Ponzi. They ordered the examiner and the official committee of Celsius creditors to determine who would head the probe.
Difficult questions about lending platforms and DeFi protocols
The disaster surrounding Celsius Network and other bankrupt lending platforms has led to a rude awakening in the industry. Many have begun questioning how lending platforms and yield farms make their profits to pay users’ yields and have realized something doesn’t add up.
Long before the current crisis, critics of the industry have outright accused major players of operating just like a classic Ponzi dressed in new technical terms—old wine in new bottles.
While in DeFi yield farms, many payments are made with new tokens or ’emissions,’ lending platforms like BlockFi and Celsius have a tougher time explaining how they can afford to pay yields multiple times greater than those paid by most sovereign or corporate bonds.
At times, when withdrawal requests…
