Celsius founder withdrew $10M prior to bankruptcy filing, says FT

By: Mark Jessy

Celsius founder withdrew $10M prior to bankruptcy filing, says FT

October 3, 2022 10:41 AM

According to reports, the withdrawal details will be included in upcoming court filings, and the crypto platform's founder and former CEO may be ordered to repay the money.


A few weeks before the crypto lending platform Celsius Network froze customer funds and declared bankruptcy, its founder and former CEO Alex Mashinsky allegedly withdrew $10 million.


Financial Times sources say Mashinsky made the withdrawal in "mid to late May," before the freeze on all withdrawals went into effect on June 12.


With 1.7 million customers and $25 billion in assets under management, Celsius was a prominent cryptocurrency lending platform. However, the current bearish cryptocurrency market conditions caused a $2.85 billion hole in the company's financial statements.


As a result, Celsius halted customer withdrawals in June, then filed for Chapter 11 bankruptcy in July, with Mashinksy attempting to reorganize and revitalize the company so that it focuses on crypto custody services.


Mashinsky's withdrawal raises questions about whether or not he was aware that the company would be freezing customer funds and withdrawals.


A spokesperson for Celsius, however, told FT that the company's founder had previously withdrawn cryptocurrency in order to settle federal and state tax obligations.


The spokesperson said that Mashinsky and his family still had $44 million worth of crypto frozen on the platform, and that "in the nine months leading up to that withdrawal, he constantly deposited crypto in volumes that equaled what he decided to withdraw in May."


It has been reported by the FT that Mashinsky's estate planning dictated the timing of his withdrawal.


Approximately $8 million was used to pay income taxes on the yield the assets generated, and the remaining $2 million was made up of the platform's native token, Celsius (CEL).


When Celsius presents the relevant transactions in court in the coming days as part of disclosures by the crypto-lender regarding its finances, the questions will likely be answered.


In the United States, payments made by a company in the 90 days prior to a bankruptcy filing can be reversed to benefit creditors, so Mashinsky may be required to return the $10 million.


According to Mashinsky's resignation letter dated September 27th, his position as CEO of Celsius "has become an increasing distraction," though he promised to keep working on a solution to repay creditors.