Alex Mashinsky, former chief executive and co-founder of bankrupt Celsius Network, and two other top executives at the company withdrew $41.8 million worth of cryptocurrencies less than a month before blocking investors from withdrawing their funds from the currency lending platform, according to crypto news site CoinDesk.
Mr Mashinsky and co-founders Daniel Leon and Nuke Goldstein withdrew digital tokens including Bitcoin, Ether and Celsius (CEL) from their custodian accounts in May and June this year, CoinDesk reported, citing a Statement of Financial Affairs document filed by law firm Kirkland & Ellis in the Southern District Court of New York on Wednesday.
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“Mashinsky withdrew about $10m in cryptocurrency in May 2022. Leon withdrew about $7m (and an additional $4m worth of CEL denoted as 'collateral') between May 27 and May 31,” CoinDesk said.
“Goldstein withdrew around $13m (and an additional $7.8m worth of CEL also denoted 'collateral').”
On June 13, Celsius Network froze all withdrawals and transfers between accounts, citing “extreme market conditions” after a prolonged fall in cryptocurrency prices that was exacerbated by the collapse in May of so-called stablecoin TerraUSD and its sister token Luna.
In June, Bitcoin dropped below the key $20,000 level for the first time since December 2020, while about $2 trillion has been wiped from the market value of cryptocurrencies since late last year, according to data compiled by CoinGecko.
On July 13, Celsius Networks initiated Chapter 11 proceedings in an effort to stabilise its business, the company said in a statement.
“This is the right decision for our community and company,” Mr Mashinsky said at the time.
“I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company.”
Hundreds of investors in Celsius have written to Judge Martin Glenn, who is overseeing the bankruptcy case, to beg for his help in getting their money back.
Many have lost their life savings and cannot afford to pay rent or mortgages, according to the letters submitted to Judge Glenn.
One investor from the UK said he made his last deposit of $10,000 on June 8, which was accepted by Celsius “even though they clearly knew they were about to block withdrawals on June 13, 2022".
“So why keep allowing deposits? This, in my opinion, is indeed an act of fraud,” Alexander Simmons wrote in his letter to the judge.
Launched in 2017, Celsius Network was considered a major player in the cryptocurrency lending sector with 1.7 million customers from around the world, including the US, the UK, France, South Korea and Australia.
It offered high interest-bearing products of up to 18 per cent to customers who deposited their cryptocurrency with the company and also lent cryptocurrencies for investors to earn a return.
In the bankruptcy filing, Celsius disclosed that it has a $1.19 billion deficit on its balance sheet, with $5.5bn of liabilities against $4.3bn of assets, Bloomberg reported.
Celsius Network’s total assets plummeted from $22.1bn to $4.3bn — a drop of $17.8bn — between March 30 and July 14, while it owes investors about $4.7bn, the company said in the filing.
Mr Mashinsky resigned from Celsius last week and Mr Leon stood down from his position as chief strategy officer on Tuesday, Bloomberg reported.
