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HomeMarketCrypto Lender Celsius Lied About Its Health Before Bankruptcy, Examiner Says

Crypto Lender Celsius Lied About Its Health Before Bankruptcy, Examiner Says

Alex Mashinsky, former CEO of Celsius Network, in April 2022.

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Benjamin Girette/Bloomberg

It’s been more than seven months since crypto lender Celsius Network froze withdrawals, locking up billions of dollars in funds loaned by customers chasing double-digit interest rates. A newly released investigation shows just how hard it will be for investors to get their money back.

In a 689-page report released early Tuesday morning, bankruptcy examiner Shoba Pillay of Jenner & Block detailed the results of her four-month investigation into the origins of Celsius’ collapse and the alleged lies that firm executives told customers as the firm approached bankruptcy.

The investigation found that Celsius executives touted the safety of their business, even as they worried behind the scenes about evaporating liquidity. The report said that the firm propped up the value of its own token, called CEL, inflating its balance sheet, while company insiders including then-CEO Alex Mashinsky cashed out millions of dollars worth of tokens. And even as Celsius told customers it was able to pay such high yields because it was earning even more revenue, the report said Celsius was actually losing hundreds of millions of dollars on bad investments.

“Celsius conducted its business in a starkly different manner than how it marketed itself to its customers in every key respect,” the report said.

Mashinsky and Celsius didn’t respond to requests for comment.

The examiner’s report could set the stage for Celsius’ bankruptcy estate or creditors to attempt to seek recoveries from Mashinsky and other people or entities to which the firm transferred money in the months before its collapse.

For crypto investors, the report offers many stark lessons.

First, though many U.S. regulators believe that crypto firms should subject themselves to oversight, for now, investors in many crypto products are almost wholly dependent on the accuracy of the assertions of firms they’re giving money to. That’s a recipe for disaster.

For example, Celsius before its demise regularly told customers that it sent 80% of the revenue it generated from lending activities back to investors as a yield on their investments. The examiner’s report said that was a lie, noting that employees said rates were driven by marketing concerns.

On regular “Ask me anything” livestreams, Mashinsky and other employees made statements about the company’s health, and the company’s risk team sent detailed lists of inaccuracies that they asked to be edited out of the videos. Mashinsky continued to argue that Celsius was healthy right up until it froze withdrawals.

Second, customers hoping to recover funds from Celsius’ bankruptcy proceeding might have to wait a while longer.

On Monday, bankrupt hedge fund Alameda Research sued
Voyager Digital,
another crypto lender that was once a Celsius competitor, seeking the return of $445.8 million that Alameda had paid to Voyager. The filing alleged that Alameda was already essentially insolvent when the payments were made to Voyager, and that Alameda’s estate should get the money back to be shared among all its creditors and not just Voyager, which is currently in its own bankruptcy proceedings.

As independent examiners and creditors’ investigators piece together the events leading up to the bankruptcies of Celsius, Voyager, Alameda, and other crypto firms, similar “clawback” claims are likely, bankruptcy lawyers say.

Courts in many cases allow bankrupt firms to retrieve funds used to repay loans in the months before they went bankrupt, or even longer depending on when the firm was found to be insolvent. With other firms, like Alameda, conducting their own analyses of loans that they repaid and the interconnectedness of the crypto ecosystem, it could take a while for bankruptcy estates to sort out which funds exactly are available to them to repay creditors.

Even as token prices start to recover, it might be months before the fallout of the so-called crypto winter is fully understood.

Write to Joe Light at


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