Key Takeaways:
- Months before bankruptcy, Alex Mashinsky took over the Celsius trading system.
- Mashinsky frequently disagreed with Frank van Etten, the company’s former chief investment officer, regarding trading choices and his interference with the trading style.
In July, Celsius filed for chapter 11 bankruptcy with nearly $4 billion in customer debt. The company has been the focus of numerous investigations over the past month, including those conducted by Canadian authorities.
According to the Financial Times, Alex Mashinsky allegedly took control of Celsius’ trading decisions, causing a $50 million loss in January. As per reports, Mashinksy assembled his investment team in January to let them know he would manage the firm’s trading plan privately.
He instructed the trading team to sell Bitcoin valued at hundreds of millions of dollars in preparation for aggressive results and his belief that cryptocurrency prices would crash. He neglected to seek advice from internal finance consultants and did not assess Celsius’ holdings the recognition they deserved.
According to the report, Mashinsky allegedly invalidated executives with decades of knowledge of the financial marketplaces as part of his trading revamp in the days leading up to the Fed meeting.
The Financial Times was informed by an unidentified team member that:
“He gave the traders the go-ahead to heavily trade the book based on false information. Huge chunks of bitcoin were being lugged around by him.”
Mashinsky’s management style then led to conflicts with Celsius Chief Investment Officer Frank van Etten, who was forced to leave the company in February after only four short months on the job.
Having followed the Fed meeting, cryptocurrency prices further fell. Celsius, which at the time had $22 billion in customer funds, suffered losses of $50 million in January.
Nevertheless, it is unclear how much of that sum was attributable to Mashinsky’s engagement in the firm’s trading tactics.
The bankruptcy of Celsius, in the opinion of the firm’s attorneys, was primarily brought on by the breakdown of cryptocurrency prices rather than negligence on the company’s part. Celsius went from being a $3 billion business in December 2021 to being bankrupt and in debt.
Debt holders of Celsius asserted that Mashinsky purposefully deceived the general public in a formal statement. Mashinsky allegedly misled customers into believing their money was secure before declaring bankruptcy a month later in his public videos and messages.
The collapse of the 2022 cryptocurrency market was primarily centered on crypto lending giants. The companies most affected were Celsius Network, Voyager, and Three Arrows Capital. Although the market appears to have fractionally retrieved, the businesses still have a hard time.
