Celsius Network accused of unlimited repeated rehypothecation of user assets! Custodian terminates partnership

The cryptocurrency custodian institution Prime Trust has terminated its partnership with the centralized lending platform Celsius Network and issued a 30-day ultimatum for its exit from the platform, citing high risks.

Prime Trust

Since March last year, Celsius has been using Prime Trust to store some user assets. Centralized lending platforms require professional cryptocurrency custodians to hold their users' assets, such as:

• Nexo Custodian: BitGo
• BlockFi Custodian: Gemini
• Celsius Network: BitGo, Prime Trust, Fireblocks

Prime Trust has confirmed the termination of its partnership with Celsius Network after more than a year and has closed Celsius' API access to the custody platform following the announcement. Prime Trust stated:

Due to various business factors, the partnership has been terminated, and we wish Celsius well in the future. We will not make any further comments.

Reason Revealed: Celsius' High Leverage

According to an unnamed source cited by CoinDesk, Prime Trust was actually concerned about Celsius' unlimited rehypothecation of assets.

Celsius, on the other hand, rebutted that it was Prime Trust's inadequate level of service that led to the termination of the partnership due to an inability to meet user demands. A spokesperson stated:

Since serving residents of New York, Celsius has never rehypothecated user assets, but Prime Trust was unable to meet the service requirements of our users, so we will seek alternative solutions.

CoinDesk's Parent Company's Business?

Celsius founder Alex Mashinsky criticized the alleged misinformation in a report by CoinDesk on Twitter:

CoinDesk forgot to tell you that its parent company includes our competitor Genesis Trading and wrote a false article about Celsius. We have never rehypothecated user assets and did not terminate the partnership due to Prime Trust's poor service.

The parent company of CoinDesk is the Digital Currency Group (DCG), which also owns the digital asset trading platform Genesis Global Trading and has been involved in crypto lending since 2018.

CoinDesk claims to be an independent media outlet separate from its parent company, and Alex Mashinsky did not explain the reasons for the termination of the partnership.

However, Michael Shaulov, CEO of Fireblocks, another custodian platform that partners with Celsius, responded to the incident by stating, "As a non-custodial technology provider, we do not interfere with our clients' business."