Bankrupt Crypto Lending Firm Celsius CEO Admits to Misappropriating Client Assets and Manipulating Prices

In July 2022, following the collapse of LUNA/UST, Celsius, a crypto lending institution with 2 million investors, faced operational issues and halted customer withdrawals. Subsequently, the firm announced its bankruptcy protection filing under relevant laws.

Celsius's business model was straightforward: promote cryptocurrency lending to investors (and even the general public) through online or offline events. Investors simply had to purchase cryptocurrency and deposit it with Celsius to receive an annual return of 18.6%.

After receiving cryptocurrencies from investors, Celsius would lend them to other institutions, such as Three Arrows Capital. Additionally, Celsius issued its own tokens, enticing investors to buy them for appreciation and profit.

However, it has been proven that nearly no crypto institution is completely clean: misappropriating client funds and manipulating token prices seem to be the norm, and Celsius was no exception.

During this week's court hearing, the U.S. Department of Justice charged Celsius founder and CEO Alex Mashinsky with seven counts of fraud, conspiracy, and market manipulation. Initially, he denied these charges, but evidence made denial futile.

Mashinsky now admits they indeed lied to customers, including concealing the true state of the business, misusing client funds without consent, and manipulating the platform's token prices to profit from clients. As part of a plea agreement, Mashinsky agreed to forfeit $48 million in ill-gotten gains.

Celsius marketed itself as a modern bank while operating more like a venture capital fund, attracting customer funds through false and misleading interfaces and turning clients into unwitting investors.

Celsius emphasized stable, low-risk, high-return investments to clients. In reality, its operations were highly risky, which is why Celsius immediately faced a financial shortfall following the LUNA/UST collapse.

Further investigations revealed that Celsius had a 4.7 billion funding issue upon filing for bankruptcy, ultimately showing a 1 billion shortfall on its balance sheet—representing the loss to Celsius's clients.

In April 2025, Mashinsky will face final judgment in court. Notably, this is a criminal case. Although a plea agreement has been reached, whether prison time is required remains unclear.