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Celsius Network

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Summary

Celsius Network was a centralized crypto lending platform founded in 2017 that attracted over 1.7 million users and $20 billion in assets under management by offering yields of up to 18% on deposited cryptocurrency. In June 2022 the platform froze all withdrawals, subsequently filed for Chapter 11 bankruptcy in July 2022, and exposed a $1.2 billion balance sheet deficit. Founder and CEO Alex Mashinsky was arrested in July 2023, pleaded guilty to commodities fraud and securities fraud in December 2024, and was sentenced to 12 years in federal prison in May 2025.

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Business Model and Yield Product

Celsius Network was founded in 2017 by Alex Mashinsky, Daniel Leon (also known as Shlomi Daniel Leon), and Hanoch 'Nuke' Goldstein. It raised $50 million in an initial coin offering (ICO) in 2018 and $750 million in 2021 at a $3.25 billion valuation. The platform operated as a centralized crypto lender: users deposited cryptocurrencies such as Bitcoin and Ethereum into Celsius-controlled wallets and received annualized interest yields, advertised at up to 18%. Celsius generated revenue by on-lending these deposits to institutional borrowers including hedge funds, exchanges, and other financial institutions, claiming to pass 80% of loan interest back to depositors. Users who held the native CEL token received higher yield tiers and discounted loan rates, creating structural demand for the token. The platform grew to over 1.7 million users and at peak held more than $20 billion in assets under management as of early 2022. Regulators later alleged that Celsius misrepresented multiple material aspects of this model, including asserting that all loans were collateralized, that user deposits could be withdrawn at any time, and that the company maintained a $750 million insurance policy — claims the SEC, CFTC, FTC, and DOJ all alleged were false.

Sources

June 2022 Withdrawal Freeze

On June 12, 2022, Celsius Network announced via social media that it was pausing all withdrawals, swaps, and transfers between customer accounts, citing 'extreme market conditions.' The announcement came during a period of broad cryptocurrency market decline, including the collapse of the Terra/LUNA ecosystem. Celsius stated that acting in the interest of its community was its 'top priority' and that operations would continue, but provided no timeline for restoring access. The freeze triggered widespread alarm among its more than 1.7 million users who held assets on the platform. Celsius's bankruptcy filing later attributed the crisis to a modern bank run dynamic, wherein depositors anxious about the security of funds attempted to withdraw in large numbers and at rapid pace. In early July 2022, Celsius laid off approximately 150 employees, roughly 25% of its workforce. Court filings later confirmed the platform had an approximately $1.2 billion deficit in its balance sheet at the time of the freeze, with $5.5 billion in total liabilities against $4.3 billion in assets, much of which was illiquid.

Sources

Chapter 11 Bankruptcy

On July 13, 2022, Celsius Network LLC and certain affiliates filed voluntary petitions for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. The filing revealed that Celsius owed approximately $4.7 billion to its users, who were classified as unsecured creditors, out of $5.5 billion in total liabilities. Celsius retained Kirkland & Ellis as restructuring counsel. The case proceeded through 2022 and 2023, during which an official unsecured creditors' committee was formed, represented by White & Case LLP. In May 2023, the court approved an auction process that selected Fahrenheit LLC as the winning bidder, agreeing to acquire a minority stake and facilitate a public listing. The bankruptcy plan was confirmed by approximately 98% of account holders and approved by the bankruptcy court on November 9, 2023. On January 31, 2024, Celsius formally emerged from Chapter 11 and commenced distributions of over $3 billion in cryptocurrency and fiat currency to creditors. The recovery rate for eligible creditors was estimated between 67% and 85% of holdings. As of subsequent reporting, approximately 251,000 of 372,000 eligible creditors had received distributions totaling more than $2.53 billion.

Sources

Criminal Charges Against Alex Mashinsky

On July 13, 2023, the U.S. Attorney's Office for the Southern District of New York (SDNY) announced the arrest of Alexander Mashinsky and filed a seven-count criminal indictment against him and former Chief Revenue Officer Roni Cohen-Pavon. The charges included securities fraud, commodities fraud, two counts of wire fraud, conspiracy to manipulate the price of the CEL token, and market manipulation of CEL. Prosecutors alleged Mashinsky operated a years-long scheme to mislead customers, falsely claiming Celsius only issued collateralized loans, misrepresenting the company's financial health, and secretly selling tens of millions of dollars in personal CEL holdings while publicly denying doing so. Prosecutors alleged Mashinsky personally profited more than $48 million from CEL token sales while engineering artificial price inflation. On December 3, 2024, Mashinsky pleaded guilty to two counts: commodities fraud and a scheme to manipulate the CEL token price. On May 8, 2025, U.S. District Judge John Koeltl sentenced Mashinsky to 12 years in federal prison, along with three years of supervised release and a $48.4 million forfeiture order. The sentence was one of the longest handed down in cases arising from the 2022 cryptocurrency market collapse. Prosecutors had sought 20 years; the defense requested one year and a day. Approximately 250 victims died before the sentencing was delivered.

Sources

FTC, SEC, and CFTC Regulatory Actions

On July 13, 2023, concurrent with the DOJ arrest, three federal agencies filed separate enforcement actions against Celsius and Mashinsky. The Federal Trade Commission filed a complaint alleging unfair and deceptive practices, asserting that Celsius took title to and misappropriated deposits totaling more than $4 billion, using consumer funds to pay rewards to other customers, fund operations, borrow from institutions, and make high-risk investments. Celsius agreed to a settlement judgment of $4.7 billion — among the largest in FTC history — suspended to permit asset distribution to consumers in bankruptcy proceedings. The settlement permanently banned Celsius from offering, marketing, or promoting any product or service involving consumer asset deposits, exchanges, or withdrawals. Separately, the FTC case against Mashinsky and co-founders Daniel Leon and Nuke Goldstein proceeded in federal court; Mashinsky later settled with the FTC for $10 million and received a lifetime ban from financial services. The CFTC filed a complaint in SDNY alleging fraud and material misrepresentations in connection with Celsius's operation as a commodity pool, charging that Celsius falsely touted high profits and security for digital asset deposits. The SEC simultaneously filed a securities fraud lawsuit against Celsius and Mashinsky.

Sources

Creditor Recovery: Fahrenheit and Ionic Digital

Following an April–May 2023 court-supervised auction, Fahrenheit LLC was selected as the winning bidder for Celsius's assets. Fahrenheit agreed to acquire a $50 million minority stake in a successor entity and facilitate a public listing so creditors could sell their equity stakes. The reorganization plan, approved by approximately 98% of voting account holders and confirmed by the bankruptcy court on November 9, 2023, included the distribution of over $3 billion in cryptocurrency and fiat currency to creditors. A new Bitcoin mining company, Ionic Digital Inc., was created to hold Celsius's mining infrastructure — approximately 87 megawatts of self-mining capacity, 142 megawatts of hosted mining, and a Cedarvale development site targeting 240 megawatts — and distributed to creditors as common stock valued at $20 per share. Hut 8 (post-merger with US Bitcoin Corp) was engaged to provide mining management services for Ionic Digital for a fee exceeding $20 million per year. As of late 2024, Ionic Digital had not completed a public listing, and some creditors were exploring liquidation of the mining company. Cumulative distributions as of that period exceeded $2.53 billion to approximately 251,000 of 372,000 eligible creditors, representing an estimated 67–85% recovery on eligible claims.

Sources

Alleged Misrepresentations and Risk Concealment

Regulatory filings from the SEC, CFTC, and FTC collectively alleged that Celsius and Mashinsky made systematic material misrepresentations to customers throughout the platform's operation. Key alleged misrepresentations included: (1) that all loans issued by Celsius were fully collateralized, when the SEC alleged the company made uncollateralized loans totaling $1.2 billion as of April 2022 and nearly $10 million in uncollateralized loans as early as 2020; (2) that customer deposits were safe and withdrawable at any time; (3) that the company maintained a $750 million insurance policy on deposits; (4) that Celsius had regulatory approval for its operations; and (5) that Celsius was profitable and in sound financial health. The CFTC complaint further alleged that Celsius deployed $500 million of customer assets into risky decentralized finance (DeFi) arrangements through a third party, resulting in losses of at least tens of millions of dollars. Mashinsky personally was alleged to have secretly sold approximately $68.7 million in CEL tokens while publicly denying such sales, and to have directed or allowed manipulation of the CEL token price for personal gain.

Sources

Timeline

2017-01-01

Celsius Network founded by Alex Mashinsky, Daniel Leon, and Nuke Goldstein.

Celsius Network Wikipedia

2018-01-01

Celsius raises $50 million in an initial coin offering (ICO).

Celsius Network Wikipedia

2021-10-01

Celsius raises $750 million at a $3.25 billion valuation, with assets under management approaching $20 billion.

Celsius Network Wikipedia

2022-06-12

Celsius announces it is pausing all withdrawals, swaps, and transfers between accounts, citing 'extreme market conditions.'

Celsius Network on X (Twitter)

2022-07-13

Celsius Network files for Chapter 11 bankruptcy in the Southern District of New York; balance sheet shows a $1.2 billion deficit and $5.5 billion in total liabilities.

Vermont DFR Consumer Alert

2023-05-01

Court-supervised auction selects Fahrenheit LLC as the winning bidder for Celsius's assets.

Celsius Emerges from Chapter 11 - Business Wire

2023-07-13

Alex Mashinsky arrested by the DOJ and charged with seven counts including securities fraud, commodities fraud, wire fraud, and CEL token manipulation. FTC, SEC, and CFTC simultaneously file civil enforcement actions. Celsius agrees to a $4.7 billion FTC settlement judgment.

DOJ SDNY Press Release

2023-11-09

U.S. Bankruptcy Court confirms Celsius's reorganization plan, approved by approximately 98% of voting account holders.

White & Case Press Release

2024-01-31

Celsius formally emerges from Chapter 11 bankruptcy and commences distribution of over $3 billion in cryptocurrency and fiat to creditors. Ionic Digital Inc. shares distributed to eligible creditors.

Celsius Emerges from Chapter 11 - Business Wire

2024-08-27

Bloomberg reports that some Celsius creditors are exploring liquidation of Ionic Digital, which has not yet completed a public listing.

Bloomberg

2024-12-03

Alex Mashinsky pleads guilty to two fraud counts: commodities fraud and a scheme to manipulate the CEL token price.

CoinDesk

2025-05-08

U.S. District Judge John Koeltl sentences Alex Mashinsky to 12 years in federal prison, with three years of supervised release and a $48.4 million forfeiture.

CNBC

model: claude-sonnet-4-6

generated: 5/8/2026, 2:31:07 AM

last updated: 5/8/2026, 2:42:01 AM

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