Investors in cryptocurrency investment platform Celsius have come forward with accusations of wash trading and price manipulation against Wintermute, one of the main market makers of the platform. According to them, Wintermute was hired by Celsius executives to facilitate illegal practices with the aim of misleading investors and distorting trading volumes.
Wintermute accused of price manipulation and wash trading
In the ongoing trial involving Celsius, where Alex Mashinsky and other company executives have been pursued by creditors since July 2022, London-based market maker Wintermute has also been implicated in the alleged crimes committed by Celsius.
The plaintiffs recently amended their lawsuit in New Jersey federal court by filing a manipulation claim against Wintermute, one of Celsius’ main market makers. According to the their allegations, Wintermute and Celsius executives colluded to facilitate manipulative acts. in particular to deceive investors by artificially increasing trading volumes.
According to the class actions cited by Bloomberg this Friday, June 23, the plaintiffs allege that Wintermute was engaged by Celsius management to participate in these improper marketing practices. They allegedly began in March 2021 and continued until Celsius’ withdrawals were frozen in June 2022. According to investors, Wintermute would have used the wash trading to manipulate trading volumes and artificially support the value of the platform’s native token, the CEL. These illegal activities would have misled investors.
Indeed, Wintermute is supposed to facilitate trading within the market by providing sufficient liquidity one as a market maker i.e. offers to buy and sell all the time. You’ve Coinprihended it right, according to the current accusation, instead of guaranteeing a fair market for all players, it may have generated fictitious trading volume in order to influence them! While this practice was frequently used when the industry was unregulated, for example on NFT collections, it is becoming less common as detection tools and legal constraints become increasingly present.
In addition, the plaintiffs claim that Wintermute was recruited specifically to participate in the wash trading and other forms of market manipulation. They also argue that Wintermute would have supported Celsius CEO Alex Mashinsky in order to maintain the value of the CEL token after the collapse of Terra and Luna.
What is the true nature of the relationship between the two companies?
Although the exact nature of the relationship between Celsius and Wintermute is not yet known, the plaintiffs cite publicly available internal conversations between Celsius executives as evidence of these alleged practices. In addition, fund transfers made just prior to Celsius’ bankruptcy allegedly shed light on Wintermute’s alleged nefarious activities according to tweets such as:
However, Wintermute denied any wrongdoing in a statement to Bloomberg saying it was complying with current regulations. It’s important to remember that an examiner appointed by the bankruptcy court for the Celsius case had revealed that the platform operated like a Ponzi pyramid.
During the bankruptcy proceedings, Celsius revealed a $5.5 billion debt to its customers. Nonetheless, in February the bankrupt platform published a list of creditors who will be reimbursed with a maximum amount requirement. Following the proliferation of cryptocurrency-related complaints over the past 12 months, are we going to see case law that could lead to more similar cases?
Coming from a journalism university background, I came across Bitcoin and cryptocurrencies not long ago.
The potential of the Blockchain seduced me and I made it my research topic.