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Alex Mashinsky withdrew $10 million of cryptocurrency before customer withdrawals were frozen

4 October 2022
2 min.
Alex Mashinsky withdrew $10 million of cryptocurrency before customer withdrawals were frozen

Before the account was frozen

Cryptocurrency (СС) lender Celsius filed for bankruptcy in July amid a collapse in the cryptocurrency market. Its founder and Chief Executive Officer Alex Mashinsky also stepped down this week, having previously withdrawn $10m worth of cryptocurrency before the company froze withdrawals.

The director's withdrawal took place back in May, when the cryptocurrency market began experiencing problems after the Terra USD stabelcoin lost its peg to $1 and collapsed.

Mashinsky thus outpaced Celsius customers when the company froze withdrawals on 12 June. But it is less than a month later in July, the company declared bankruptcy, citing a $1.2bn shortfall in its balance sheet.

The former director himself and his family still hold about $44mln in frozen assets in the Celsius network after his exit.

Most of the withdrawn funds were used to pay state and federal taxes.

It's also worth noting that in early September, Vermont's regulator suggested that the crypto firm was a Ponzi scheme, pointing to a number of state problems related to unregistered securities offerings and fraud conducted by the crypto firm. The documents claim that Celsius was already bankrupt back on 13 May, which is before Alex Mashinsky withdrew his funds.

Regardless of Vermont's lawsuit, Mashinsky could be forced to pay back $10 million. US laws dictate that payments made by a company 90 days before bankruptcy can be "clawed back" for the benefit of its creditors.

The investigation is likely to intensify against Alex Mashinsky, who stepped down as chief executive last Tuesday. He co-founded Celsius in 2017.

Moreover, the market valuation of cryptocurrency lender Celsius rose to $3bn in 2021 after raising $600mln in equity investments. However, the lender's big downside is the fact that it sometimes paid customers more interest than it actually received from the loans.

Persons1 and Companies1 in the news

Founder of Celsius Network
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Celsius Network
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