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Celsius Ex-CEO Reportedly Withdrew $10M Before Filing For Bankruptcy

by BlockNews Team
October 3, 2022
in BUSINESS, CRYPTO, MEDIA, SOCIAL
Reading Time: 3 mins read
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Celsius ex-CEO, Alex Mashinsky, withdrew $10 million from the crypto lending platform and froze withdrawals in June, right before filing for bankruptcy. According to reports, the funds were used to cover taxes and estate planning dues.

A person close to the matter has said that $8 million went towards settling tax dues for the company’s generated income. The remaining $2 million in CEL tokens was used for estate planning.

“In mid to late May 2022, Mr. Mashinsky withdrew a percentage of cryptocurrency in his account, much of which was used to pay state and federal taxes.”

In June 2022, the Celsius network stopped transactions involving swaps, transfers, and withdrawals, citing dire conditions in the market. The company did so, despite having assured customers that Celsius was secure financially and on “full speed mode moving forward,” barely days before filing for Chapter 11 protection.

Mashinsky submitted his resignation only recently in a press release dated September 27. The ex-CEO explained that his role had become an ‘increasing distraction’ but committed to delivering the best possible outcome to the company’s creditors.

Celsius bankruptcy claim

Celsius claimed it had a $1.2 billion deficit on its balance sheet in June before halting transactions. Among the explanations given by the company for freezing transactions were that the acceleration of withdrawals would have made it possible for some customers to be fully paid based on a first-come-first-serve basis while leaving other customers to wait for the company to collect value from illiquid assets or the deployment of longer-term investments before they could be compensated.

A spokesperson for the ex-Celsius CEO told Financial Times that Mashinsky and his relations still hold up to $44 million worth of frozen crypto assets on the Celsius network even after the alleged withdrawal. He defends Mashinsky’s intentions saying they were not criminal in any way, seeing that he had deposited funds equaled what he had withdrawn to pay taxes.

“In the nine months following that withdrawal, he consistently deposited cryptocurrency totaling what he withdrew in May.”

The spokesperson notes that during the bankruptcy proceedings, Mashinsky availed this information to the Official Committee of Unsecured Creditors (UCC).

Despite efforts to defend him, Mashinsky’s actions have undoubtedly raised concerns about the former executive, who was already under scrutiny. Terra’s FatMan has highlighted that Mashinsky had been withdrawing funds while claiming that the company had ‘sufficient reserves.’ He says:

“In the days leading up to the Celsius collapse, Mashinsky assured customers that everything was okay, claiming he had “adequate reserves.” Unbeknownst to them, he was simultaneously withdrawing millions of dollars from the soon-to-be bankrupt company into his pocket. Pathetic”

However, Crypto users criticized Mashinsky’s decision to withdraw funds, arguing that the company was healthy. Widespread concern among community members is whether the former CEO knew the company would be in a financial crisis after the market crash.

The bankruptcy court has ordered Celsius to submit a complete record of Mashinsky’s transaction history and other documentation that will shed light on the company’s financial position. The disclosures are likely to answer the questions about Mashinsky’s motives. It is also possible that the ex-official will have to refund the $10 million because of the legal provision in the U.S. that a company’s payments may be reversed in favor of creditors.

Tags: BusinessCelsiuscrypto
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