Celsius

avoid.net/celsius→4/100·95% conf.

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4/100

[CRITICAL]95% conf.

Summary

Celsius Network LLC was a cryptocurrency lending platform that collapsed in July 2022, leaving customers unable to access approximately $4.7 billion in deposits. The company filed for bankruptcy after allegations of fraudulent misrepresentation, Ponzi scheme operations, and risky investment practices by founder Alex Mashinsky, who was sentenced to 12 years in prison for fraud.

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Fraud and Criminal Charges

The founder and former CEO of the failed cryptocurrency lending platform Celsius Network could face decades in prison after pleading guilty Tuesday to federal fraud charges, admitting that he misled customers about the business. A plea agreement Mashinsky made with prosecutors calls for him to be sentenced to up to 30 years in prison and to forfeit over $48 million. On May 8, 2025, he was sentenced to 12 years in federal prison, ordered to forfeit $48,393,446, and fined $50,000. U.S. Attorney Damian Williams said Mashinsky "orchestrated one of the biggest frauds in the crypto industry" as his company's assets purportedly grew to about $25 billion at its peak. He said Mashinsky used catchy slogans like "Unbank Yourself" to entice prospective customers with a pledge that their money would be as safe in crypto accounts as money would be in a bank. Prosecutors said, Mashinsky and co-conspirators used customer deposits to fund market purchases of the Celsius token to prop up its value. Machinsky made tens of millions of dollars selling his own CEL tokens at artificially high prices, leaving his customers "holding the bag when the company went bankrupt."

Sources

[1]HIGHFortune - Celsius Network founder pleads guilty to fraud chargesnews article
[2]MEDCelsius Network Losses Attorney - Cryptocurrency Investmentsnews article

Customer Losses and Bankruptcy

Meanwhile, Celsius owes its users around $4.7 billion, according to its bankruptcy filing — and there's an approximate $1.2 billion hole in its balance sheet. On July 13, 2022, Celsius filed for Chapter 11 bankruptcy. A declaration filed the following day reported a $1.2 billion deficit in the company's balance sheet. All told, Celsius customers lost more than $5 billion. The bankruptcy court's rulings only awarded accountholders 60 percent of their holdings at the time the company shut down — giving them only a portion of what they held after the market crash. More than $4.7 billion of the company's debts are to its customers, and those depositors are pleading with the judge to get what they can back. Some depositors say they lost all of their savings. Katie Davis of Australia pleaded with the judge for the return of the $138,000 she and her husband have stranded on the Celsius platform. "The thought of losing that amount of money is horrifying," Davis wrote. "If I do not get that back, I will end my life as the loss will impact my family and I significantly."

Sources

[1]HIGHCNBC - How the fall of Celsius dragged down crypto investorsnews article
[2]MEDCelsius Network - Wikipediaother
[3]MEDAmericans for Financial Reform - Crypto Fraud Costs Investors $5 billionresearch
[4]HIGHFortune - Celsius Network owes its customers $4.7Bnews article
[5]HIGHCNBC - Celsius investors owed $4.7 billion beg judgenews article

Ponzi Scheme Allegations

Stone alleges that Celsius then began to offer double-digit interest rates in order to lure in new depositors whose funds were used to repay earlier depositors and creditors. "Thus, while Celsius continued to market itself as a transparent and well capitalized business, in reality, it had become a Ponzi scheme," the lawsuit claims. The independent examiner's report filed on January 31, 2023, as part of the bankruptcy filing, said that an insider at Celsius described aspects of the business model as "very ponzi like". In an internal memo, coin deployment specialist Dean Tappen stated "that his title at Celsius should be 'Ponzi Consultant.'" That is a technical qualification of a Ponzi scheme. While Celsius does generate revenues from investing in a variety of cryptocurrency avenues, the latest financial information shows they are operating at a loss and customer returns are being paid from new investors. That is the definition of a Ponzi scheme.

Sources

[1]HIGHCNBC - Embattled crypto lender Celsius is a 'fraud' and 'Ponzi scheme,' lawsuit allegesnews article
[2]MEDCelsius Network - Wikipediaother
[3]LOWWantFI - Celsius Network Scam: A Technical Ponzi Schemeother

Regulatory Violations and Enforcement Actions

The companies also agreed to a judgment of $4.7 billion, which will be suspended to permit Celsius to return its remaining assets to consumers in bankruptcy proceedings. The former executives—ex-CEO and co-founder Alexander Mashinsky along with Celsius's other co-founders Shlomi Daniel Leon and Hanoch "Nuke" Goldstein—have not agreed to a settlement and the FTC's case against them will proceed in federal court. The Securities and Exchange Commission today charged Celsius Network Limited (Celsius) and its founder and former CEO, Alex Mashinsky, for violating registration and anti-fraud provisions of the federal securities laws, including by failing to register the offers and sales of Celsius's crypto lending product, the Earn Interest Program; making false and misleading statements to investors and engaging in market manipulation as it relates to CEL. The complaint charges the defendants with fraud and material misrepresentations in connection with the operation of its digital asset-based finance platform, which falsely touted high profits and security to induce customers to deposit their digital asset commodities on the platform. The complaint also alleges Celsius acted as an unregistered commodity pool operator (CPO) and Mashinsky operated as an unregistered associated person (AP) of a CPO.

Sources

[1]HIGHFTC - FTC Reaches Settlement with Crypto Platform Celsius Networkregulatory
[2]HIGHSEC - SEC Charges Celsius Network Limited and Founder Alex Mashinskyregulatory
[3]HIGHCFTC - CFTC Charges Alexander Mashinsky and Celsius Networkregulatory

Terra/Luna Collapse Impact

Celsius also invested its funds in other platforms offering similarly sky-high returns, in order to keep its business model afloat. A report from The Block found that Celsius had at least half a billion dollars invested in Anchor, which was the flagship lending platform of the now failed U.S. dollar-pegged stablecoin project terraUSD (UST). Anchor promised investors a 20% annual percentage yield on their UST holdings — a rate many analysts said was unsustainable. Celsius was one of multiple platforms to park its cash with Anchor, which is a big part of why the cascade of major failures was so significant and swift after the UST project imploded in May. The collapse of the TerraUSD (UST) stablecoin that sent shockwaves throughout the crypto ecosystem can't be attributed to a single attacker, according to researcher Nansen. Instead, they identified the trades of a small number of players, including lender Celsius Network, as contributing to the decline. Terra's collapse caused a massive sell-off across the industry. This massive sell-off led to a bank run-style series of events where many Celsius users all at once requested their money to be withdrawn from the network, something Celsius was not able to accommodate. As a result of this, on June 12th Celsius froze withdrawals, swaps, and transfers in a move which stoked major fear among the 1.7m Celsius users.

Sources

[1]HIGHCNBC - How the fall of Celsius dragged down crypto investorsnews article
[2]HIGHBloomberg - Terra (UST, LUNA) Stablecoin Fall Caused Partly by Celsius Networknews article
[3]LOWMedium - The Aftermath of the Terra Crashother

Misrepresentations and Deceptive Practices

According to a complaint filed by the FTC in federal court, Mashinsky, Leon and Goldstein marketed the platform as a safe place for consumers to deposit their cryptocurrency, claiming in online videos and other forums that its platform was safer than banks because "we have less risk, we have much less risk." Even as its fiscal health declined, the company's top executives concealed this information from the public, telling consumers that customers' deposits were safe and soliciting new customers just days before it froze customer accounts and filed for bankruptcy, according to the FTC. In May 2022, Mashinsky falsely claimed in an online video that "Celsius is stronger than ever, we have billions of dollars in liquidity." The FTC says the company and its top executives deceived users by falsely promising them that they could withdraw their deposits at any time, that the company maintained a $750 million insurance policy for deposits, that it had sufficient reserves to meet customer obligations. Far from securing customers' cryptocurrency deposits, Celsius took title to and misappropriated these deposits totaling more than $4 billion, according to the complaint. The company used consumer deposits to fund its operations, pay rewards to other customers, borrow from other institutions, and make high-risk investments. Celsius employees from multiple departments who noticed false and misleading statements in the sessions warned Mashinsky, but they were ignored, the indictment said.

Sources