Celsius: suspected withdrawal of 42 million dollars

Celsius executives allegedly withdrew about $42 million in cryptocurrency before blocking customer withdrawals. 

This was reported by Bloomberg Law citing documents filed in the Bankruptcy Court for the Southern District of New York. 

Withdrawals made by Celsius executives

The executive withdrawals occurred between May and June, by the then-CEO Alex Mashinsky, co-founder Daniel Leon, and Chief Technology Officer Nuke Goldstein. The withdrawals were allegedly made in Bitcoin, Ether, USDC and Celsius’s CEL token.

Celsius suspended customer withdrawals indefinitely on 13 June, saying there were extreme market conditions that had made Celsius illiquid. In July, once they admitted that they actually had no more funds to meet all of their customers’ demands, they filed for bankruptcy. 

The managers’ earlier withdrawals were probably legitimate, but they evidently suggest that they had already known about the problems for several weeks, if not a month. Nevertheless, they decided to hide them from users, merely suspending their withdrawals the moment they realized they could no longer satisfy them. 

What is really curious is that instead, other executives, including the company’s Chief Compliance Officer Oren Blonstein, Chief Risk Officer Rodney Sunada-Wong, and new CEO Chris Ferraro, did not make any significant withdrawals during the time from the implosion of the Terra ecosystem to the suspension of withdrawals on Celsius. 

So it is possible to imagine that very few company executives were aware of the seriousness of the situation. 

Reconstructing the various movements according to the documents filed with the court, Mashinsky reportedly withdrew about $10 million in May and Leon $7 million in cryptocurrencies and another $4 million in CEL token. 

Instead, Goldstein withdrew about $13 million in cryptocurrencies and $7.8 million in CEL token, but deposited them into other accounts managed by Celsius. So only $550,000 would have actually gone out of the company’s accounts and into his own. The company Bits of Sunshine, owned by Goldstein, also withdrew $5.7 million in CEL token, but only to deposit them into other Celsius accounts. 

Mashinsky and Leon in the past two weeks have resigned, while Goldstein is still reported to be in charge. 

A spokesman for Mashinsky later stated that these withdrawals had been planned beforehand, and were intended to enable the payment of income taxes from the return of assets. He also stated that his family at the time the withdrawals were suspended still had $44 million on the platform.

The platform’s customer data

In addition, some of the court documents have been made publicly available, revealing the data of thousands of platform customers. 

This is a document of as many as 14,500 pages with names, amounts, cryptocurrencies owned and transaction timelines. 

Celsius’ handling of the liquidity problem was not at all transparent, and executives may bear a heavy responsibility for the loss of customer funds. For this reason, there are few now who believe their statements, as their reputation is now definitely compromised. 

It is enough to mention that after June 13 for a month they kept claiming that they were working so that they could reopen withdrawals, and instead in July they were forced to declare bankruptcy because the funds were simply not there anymore. 

Moreover, during that time they repeatedly denied the loss of the funds, effectively lying. Indeed, they kept talking about a possible restructuring plan, when in reality they were heading straight for bankruptcy. The court then simply decided to proceed as with any other common bankruptcy by auctioning off all assets to try to repay creditors. 

The story therefore is still somewhat murky, and certainly does not denote any particular honesty and transparency in the way the company’s executives communicated with former customers, now creditors, while the company was literally sinking. 

Against this backdrop, the million-dollar withdrawals in May sound particularly suspicious, not least because if they already knew what they were getting into they might as well have decided to suspend them even if they had been pre-planned. What’s more, bankruptcy law in the US also provides for the possibility of forcing the return of funds withdrawn from bankrupt companies in the 90 days prior to filing for bankruptcy.