Capital markets News

Crypto lender Celsius propped up token price with user funds, while insiders sold

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Last year, the Bankruptcy court appointed Shoba Pillay as Examiner to investigate whether crypto lender Celsius was a Ponzi scheme. While her conclusion in her 476 page final report doesn’t state whether or not it was a Ponzi scheme, she wrote, “The business model Celsius advertised and sold to its customers was not the business that Celsius actually operated.” The Examiner alleges numerous false claims by Celsius and its former CEO Alex Mashinsky in particular. Mashinsky is being sued for fraud by the U.S. Attorney General.

One of the most devastating criticisms relates to the company’s own token CEL. Much like FTT in the case of the collapse of FTX, the token played a role in the firm’s collapse. That is combined with a lack of records and very poor risk management.


  • Celsius spent $558 million propping up CEL token
  • CEO Mashinsky sold or swapped $68m in CEL tokens
  • Instead of selling user assets, user’s funds were used as collateral to borrow funds which were used to prop up the token price.

It’s alleged that Celsius was the primary market maker for the CEL token and spent significant amounts of money – at least $558 million – propping up the token price. “In effect, Celsius bought every CEL token in the market at least one time and in some instances, twice,” states the Examiner.

In 2020, Celsius “substantially expanded its purchases of CEL for the purpose of increasing CEL’s price. Instead of buying CEL when it needed to pay rewards, Celsius began timing its purchases so that they would prop up CEL’s price.” The activity was “concealed” from customers.

One of the key beneficiaries of this scheme was Celsius insiders. When CEO Mashinsky was selling tokens, the company often increased the size of its token purchases.

According to the report, Mashinsky directly sold or swapped at least $68.7m in CEL tokens. Its CTO, Nuke Goldstein, sold $2.8 million and Chief Strategy officer Daniel Leon $9.74 million.

One employee stated, “We are using users USDC to pay for employees worthless CEL . . . All because the company is the one inflating the price to get the valuations to be able to sell back to the company.” At one point, the company was using user bitcoin and ether as collateral to buy CEL, but switched to stablecoins because the rising price of crypto meant that it had an additional liability of $300 million to repay the loans.

There appeared to be an awareness that using customer deposits to buy CEL was wrong. So instead of selling customer deposits, it used them as collateral for loans, and deployed the loan proceeds to prop up the CEL price.

A second beneficiary of the high CEL price was the Celsius balance sheet, benefiting Mashinsky as the largest shareholder. We previously reported that Celsius made significant losses long before its bankruptcy.

“In 2021, Celsius recognized losses of over $800 million primarily as a result of investments with Equities First Holdings LLC, Grayscale, KeyFi Inc, and Stakehound. Celsius did not report these losses to its customers at the time they were incurred,” said the Examiner.

By the end of 2021, Celsius reported the market value of its Treasury CEL tokens as $1.5 billion. Despite including the figure on its balance sheet and a fundraising of $690 million in late 2021, its liabilities outstripped its assets by more than $100 million by that stage.

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