Independent examiner: Celsius misled investors and sometimes used new customer funds to pay for withdrawals, CEO Alex Mashinsky made false claims, and more

Shoba Pillay was appointed by a New York bankruptcy court to look at whether the crypto lender operated as a Ponzi scheme

CoinDesk 2023-01-31 Jack Schickler

Context & Ripple Effects

The examiner’s findings add court-appointed scrutiny to earlier allegations: former staff and internal documents had described compliance warnings over weak oversight and financial misrepresentation, while a Vermont filing accused Alex Mashinsky of misleading investors and using CEL to support Celsius’s balance sheet. The report matters because it addresses whether withdrawal payments drew on new customer funds, the central allegation in a former manager’s Ponzi-scheme fraud suit.

First-order effects

Celsius’s bankruptcy stakeholders gain an independent account finding investor misinformation and some withdrawal payments funded by new customer deposits.
Alex Mashinsky faces findings that his public claims were false, reinforcing the allegations already directed at the former CEO.

Second-order effects

The findings strengthen the factual basis for the Vermont allegations and for later reported CFTC investigators’ conclusion that Celsius and Mashinsky misled investors.
Crypto-lending customers and counterparties have a clearer reason to distinguish firms’ stated balance-sheet practices from their actual handling of customer funds.

Third-order effects

Court-appointed examinations and regulator investigations are becoming a mechanism for testing crypto lenders’ disclosures and customer-fund practices after failures.
If such findings recur, the crypto legitimacy gap will be defined less by token prices than by whether lending platforms can substantiate liquidity, reserves, and withdrawal claims.

The trend: Crypto lending failures are shifting scrutiny toward independently verified disclosures and the treatment of customer assets.

Discussion

@kadhim @kadhim on x
Never use Slack https://twitter.com/...
@ramahluwalia @ramahluwalia on x
1/ The Celsius bankruptcy examiner report is out. My opinion is that @Mashinsky and other executives will go to jail for a long time. Celsius propped $CEL token while Mashinsky dumped on retail. Evidence show willful deception to keep the ‘flywheel’ going Highlights🧵
@kadhim @kadhim on x
Celsius notionally had credit limits for its borrowers, but Alameda, Tether, 3AC and others all exceeded those ‘limits’. Tether's peak borrowing from Celsius was $2bn, and was considered an “existential risk” internally at Celsius. https://cases.stretto.com/... https://twitter.co…
@camcrews Cam Crews on x
@CelsiusUcc @Mashinsky Paying $1.36B more rewards than revenue is a precondition for a Ponzi Scheme. The source of those rewards substantially including deposits would confirm it. (hint: deposits paid withdrawals) https://twitter.com/...
@kadhim @kadhim on x
Wow. Celsius used investor/customer funds to prop up the price of its own CEL token, helping employees including CEO Alex Mashinsky sell, according to the Examiner. Mashinsky cashed out $68.7mn. Employees said what they were doing was “very ponzi like”. https://cases.stretto.com/…
@camcrews Cam Crews on x
Sounds like the bankruptcy filing price of CEL is $0.815 overvalued @CelsiusUcc. Celsius employees knew the true value of CEL. Meanwhile, @Mashinsky used his feline followers as exit liquidity, cashing out $68.7M. https://twitter.com/...
@aftxcreditor @aftxcreditor on x
- Genesis - FTX - BlockFi - Celsius - Voyager 5 bankrupt crypto companies. 4 of them went broke due to business model (business failure). 1 of them went broke despite the business model (theft). Important for restructuring. https://twitter.com/...
@simondixontwitt Simon Dixon on x
Manipulating the price of $CEL was the trick to mask & hide the financial truth of #Celsius, trick equity investors & hide Alex Mashinsky fake ICO Investments he never paid for. It was also what Alex Mashinsky needed to play billionaire & pump company valuation. https://twitter.c…
@kylesgibson Kyle S. Gibson on x
“Celsius Networks was exactly what it looked like for the entire time it was in operation, a dirt simple Ponzi scheme, and yet CoinDesk never ran any article that talked about its unsustainable rates.” FTFY https://twitter.com/...
@ramahluwalia @ramahluwalia on x
13/ Celsius lost $800 MM betting on $GBTC and other strategies. The GBTC ‘WidowMaker’ remains undefeated. https://twitter.com/...
@chazzonke Keith on x
1/ Starting the master thread:. Page 1 starting the document off all wrong for Celsius in the bluntest terms calling their entire operation a lie to customers. in other terms I see that as defrauding investors. https://twitter.com/...
@tphillips Todd Phillips on x
“On a stand-alone basis [Celsius] has been insolvent since inception,” the report finds. Jesus. This is all so, so bad. Celsius engaged in maturity transformation. That alone is risky enough for supervision. And supervision would have caught the rest of this ponzi. https://twitte…
@mayazi Maya Parody on x
What's shocking about Celsius, is that it wasn't some Maddoff back room scheme - not only did senior leadership know, they never hid it from the employees..they were all blissfully complicit in the fraud. Maybe that's why Mashinsky hired former sex workers for their loyalty https…
@bitfinexed @bitfinexed on x
Tethers Chinese Commercial Paper exposure makes an appearance in Celsius bankruptcy. https://twitter.com/... https://twitter.com/...
@bitfinexed @bitfinexed on x
Tether borrowed $2b FROM Celsius! https://twitter.com/...
@kadhim @kadhim on x
Examiner backs up FT reporting that Alex Mashinsky directly ordered trading in January 2022, though Mashinsky denied this in an interview with the Examiner. https://www.ft.com/... https://twitter.com/...
@smtuffy Sean Tuffy on x
In which crypto repeats the mistakes of LIBOR and FX traders a decade ago ... the speed running of TradFi history continues a pace https://twitter.com/...
@frances_coppola Frances ‘Cassandra’ Coppola on x
Looks very much as if Mashinsky was running a Ponzi scheme from 2018 onwards. https://twitter.com/...
@annmlipton @annmlipton on x
oh man this is just going to be filled with great quotes, isn't it https://twitter.com/... https://twitter.com/...
@kadhim @kadhim on x
476-page Examiner's report on Celsius Network has just landed: https://cases.stretto.com/...
@thomasbraziel Thomas Braziel on x
#Celsius - page 29 of the report: https://twitter.com/...
@kadhim @kadhim on x
Is everyone in crypto using QuickBooks?? https://cases.stretto.com/... https://twitter.com/...
@loomdart @loomdart on x
https://cases.stretto.com/... insane read but highly recommend it, very incriminating against Mashinsky
@cryptohunter0x @cryptohunter0x on x
Goodbye Mashinsky you fucking fraud. Celsius examiner report is out. Every allegation we had is true. Cell 🍆 squeezers are in full disbelief. #CelsiusNetwork https://cases.stretto.com/... https://twitter.com/...
@petenostop @petenostop on x
In April 2022, Celsius's Coin Deployment Specialist described Celsius's practice of “using customer stable coins” and “growing short in customer coins” to buy CEL as “very ponzi like.” Where is the cash coming from? ... “Users like always” https://twitter.com/...
@petenostop @petenostop on x
When regulators asked Celsius how it set its reward rates, Celsius explained that there was no correlation between the interest rates it paid to customers and the yield it generated from investing customer assets. https://twitter.com/...
@celsiansnetwork @celsiansnetwork on x
1/2 “Celsius abandoned its promise of transparency from its start. Celsius's first significant transaction after it was formed was to launch its ICO, a transaction that Celsius expected would raise $50 million. That did not happen.” #celsiusreport
@eliotwb Eliot Brown on x
In the Celsius examiner's report, a fascinating dive into the fight over whether to keep paying high yields on deposits “We are not trying to be the largest, we are trying to be the most profitable. Those 2 things don't equate” says guy who lost argument https://cases.stretto.com…
@petenostop @petenostop on x
The Celsius examiners report has been published. 🚨 Almost 700 pages to go through but it starts like this. “The business model Celsius advertised and sold to its customers was not the business that Celsius actually operated...” https://cases.stretto.com/... https://twitter.com/..…
@frances_coppola Frances ‘Cassandra’ Coppola on x
Tether's USD borrowing should really be regarded as Celsius's USDT borrowing. This would be for platform liquidity, since USD is illiquid in crypto. Mashinsky said some time ago that Tether loaned USDT, presumably against USD collateral. https://twitter.com/...

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