Crypto Biz: Celsius, FTX feel investors’ wrath as lawsuits multiply

The stunning collapse of Celsius and FTX wiped out countless lives – early adopters who prudently understood the unique value propositions of Bitcoin (BTC) and cryptocurrencies were left with little to no money when both platforms stopped withdrawing funds, closed their doors and eventually filed for bankruptcy. While there is still hope that creditors will partially recover again, the road to recovering financial losses is expected to be a long one. As they wait, creditors band together to sue these firms for various alleged wrongdoing.

This week, Crypto Biz is delving into recent lawsuits against Celsius co-founder Alex Mashinski and several venture capital firms that have backed FTX in previous investment rounds. We also take a look at the latest news about the US Securities and Exchange Commission (SEC) and end on a positive note about a potential use case for blockchain.

Celsius creditor committee proposes to sue Mashinsky and other Celsius executives

Failed lending platform Celsius, once beloved by crypto investors looking for income, is being accused by former clients of “fraud, recklessness, gross mismanagement and self-serving behavior.” In a complaint filed in bankruptcy court on Feb. 14, lawyers representing Celsius creditors suggested suing co-founder Alex Mashinsky and other former executives for such wrongdoing. “Mr. Mashinsky, Mr. Leon, Mr. Goldstein, Mr. Baudry, Ms. Urata-Thompson and Mr. Treitler breached their fiduciary obligations to Celsius,” lawyers wrote about the Celsius executives. “These parties knew that Celsius was promising its customers interest payments they couldn’t afford and did nothing to fix the problem.” It looks like Mashinsky’s troubles are just beginning.

Sequoia Capital and Paradigm among VCs facing ‘tricky’ lawsuit against FTX investors

Clients of the bankrupt FTX crypto exchange are turning to the financiers and promoters of the platform to recover some of the huge losses they have suffered. According to Bloomberg, FTX users filed a class-action lawsuit against venture capital firm Sequoia Capital and private equity firms Thoma Bravo and Paradigm — all three companies participated in FTX’s $900 million large Series B round in July 2021. Meanwhile, a separate class of lawsuit, filed in California on Feb. 14, alleged that Silvergate Bank and its CEO Alan Lane were responsible for “assisting and abetting” Sam Bankman-Freed in committing his fraud. It appears that FTX’s venture capital and business backers are about to feel the effects of the exchange’s failure.

SEC to target crypto firms operating as ‘qualified custodians’ – report

The United States has always been meant to be the basis for innovation and first-mover advantage. However, in the case of cryptocurrencies, regulators act with an iron fist. In addition to stablecoins and rate protocolsThe SEC is reportedly eyeing “qualified custodians” in its regulatory guidance and enforcement actions. According to Bloomberg, the SEC is working on a proposal that would make it harder for crypto companies to act as “qualified custodians” on behalf of clients. In practice, this could prevent hedge funds and private equity funds from continuing to work alongside cryptocurrency custodians.

Siemens Issues $64M Digital Bond on Public Blockchain

Blockchain use cases may have extended to bond offerings after German engineering firm Siemens issued a digital bond using distributed ledger technology. On Feb. 14, Siemens announced that it had sold $60 million worth of digital bonds directly to investors, including DekaBank, DZ Bank and Union Investment. The company said blockchain-based bonds have several advantages over traditional bond sales. “For example, it makes paper global certificates and central clearing unnecessary,” Siemens said. “Moreover, bonds can be sold directly to investors without the need for a bank as an intermediary.” It is important to note that the bonds were still paid by traditional methods, since the digital euro is not yet available.

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