Suspicion reignites: Celsius founder withdrew $10M before company went bankrupt
This article comes fromFT, original author: Kadhim Shubber
Odaily Translator | Nian Yin Si Tang
Odaily Translator | Nian Yin Si Tang
Just weeks before Celsius Network froze customer accounts, founder Alex Mashinsky withdrew $10 million from the crypto lender, according to people familiar with the matter.
Mashinsky’s withdrawal of the cryptocurrencies in May comes as clients are withdrawing their holdings in large numbers due to widespread turmoil in crypto markets and concerns over Celsius’ financial health.
On June 12, Celsius froze withdrawals, preventing hundreds of thousands of retail investors from withdrawing their deposits. The company filed for bankruptcy in July, leaving a $1.2 billion hole in its balance sheet.
Last year, the business peaked at $25 billion in crypto-asset deposits, and those clients were lured by Celsius's extremely high interest rates (up to 18 percent on certain cryptocurrencies).
The disclosure of the withdrawals will heighten scrutiny of Mashinsky, who stepped down as chief executive last Tuesday, and raise questions about when he knew Celsius would not be able to return client assets.
Details of the Mashinsky deal will be brought to court by Celsius in the coming days as part of the company's broader disclosure of its financial affairs.
A spokesperson for Mashinsky said that even after the withdrawal, he and his family still have $44 million in crypto assets frozen by Celsius, which he voluntarily disclosed to the official Unsecured Creditors Committee (UCC) during the bankruptcy proceedings.
“In mid-to-late May 2022, Mashinsky withdrew a percentage of cryptocurrency from his account, the majority of which was used to pay state and federal taxes. He had been depositing cryptocurrency in the nine months preceding that withdrawal. currency in the same amount as the total he withdrew in May," the spokesman said.
“He remains committed to working with the community and together advancing a recovery plan that seeks as much cryptocurrency and liquidity as possible for all,” they added.
Mashinsky, 56, who co-founded Celsius in 2017 and is the public face of the company, speaks weekly on YouTube, where he promotes his belief in liberating finance from the banking system.
Celsius is valued at $3 billion by the end of 2021, with $600 million in equity investment from U.S. investment firm WestCap and Canada's second-largest pension fund, Caisse de dépôt et placement du Québec.
Despite Mashinsky's public optimism about Celsius' prospects, behind the scenes the company has struggled with weak internal systems for managing assets, sometimes paying customers more in interest than it takes in on loans.
Celsius also suffered a series of investment losses in 2021 and 2022 that gradually contributed to its downfall, but these were not disclosed to clients. Last month, Vermont's financial regulator said Celsius was insolvent as early as May 13 of this year.
The firm suffered massive asset outflows in May as the collapse of two correlated cryptocurrencies, TerraUSD and Luna, shook the crypto markets. The demise of the two cryptocurrencies has also triggered the closure of a series of companies in the cryptocurrency industry.
Just days before Celsius’ freeze on withdrawals, the crypto lender assured clients it had adequate reserves and declared it was “full steam ahead.”
Former telecom entrepreneur Mashinsky faces being forced to return the $10 million he withdrew from Celsius. Under US law, payments made by a company within 90 days of bankruptcy are recoverable for the benefit of all creditors.
About $8 million of the assets withdrawn by Mashinsky were used to pay taxes on income generated by those assets in the Celsius deal, one of the people said.
The remaining $2 million is Celsius' native token, CEL. The withdrawal was planned in advance and was tied to Mashinsky’s estate planning, the person added.
