Celsius: 'Unbank Yourself' Into Bankruptcy

Late on Sunday 12 June 2022, Celsius Network sent its customers a short memo. Because of "extreme market conditions", it was pausing all withdrawals, swaps and transfers between accounts. About 1.7 million registered users woke up on Monday unable to touch their money. Most of them never got all of it back.

Celsius had sold itself as the safe alternative to a bank. Its founder and chief executive, Alex Mashinsky, a New York serial entrepreneur, ran weekly "Ask Mashinsky Anything" video sessions in a company T-shirt and preached a slogan: "Unbank yourself". Customers deposited crypto and earned interest, advertised at rates as high as 18% a year, at a time when bank savings accounts paid close to nothing. Customers poured about $20 billion into the platform, according to the Associated Press. When it filed for bankruptcy it owed them around $4.7 billion and had a hole of about $1.2 billion in its balance sheet.

The Pitch and the Reality

A crypto lender of this kind takes customers' coins and lends or invests them to earn more than it pays out, much as a bank lends out deposits. The difference is that a bank deposit comes with government insurance and strict rules on how much risk the bank can take. Celsius had neither.

Shoba Pillay, a former federal prosecutor appointed by the bankruptcy court as an independent examiner, published her findings in January 2023. She found that Celsius had used customer deposits to pay operating costs and customers' interest as early as 2020, that it did not run its business the way it told customers it did, and that it spent at least $558 million of its own money buying CEL, the company's in-house token, to push up the price. A token like CEL is roughly a share in a company's own loyalty scheme: Celsius paid higher interest to customers who took their rewards in it, so a rising CEL price made the whole operation look healthier than it was. Between March 2020 and June 2021 the price of CEL rose by more than 14,000 percent.

Behind the scenes the money went into risky bets: loans without collateral (security the lender can seize if the borrower fails), crypto staked in ways that could not be quickly withdrawn, and positions in decentralised finance, the automated lending and trading apps that run on blockchains. When the Terra and Luna stablecoin system collapsed in May 2022 and crypto prices fell, depositors began pulling out. Within weeks Celsius could not pay them.

Freeze, Bankruptcy, Arrest

Celsius filed for Chapter 11 bankruptcy protection in New York on 13 July 2022, a month after the freeze. During the case, Mashinsky's wife Krissy posted pictures of T-shirts reading "Unbankrupt Yourself". Creditors did not find it funny.

Exactly a year after the filing, on 13 July 2023, Mashinsky was arrested and charged with seven counts including securities fraud, commodities fraud, wire fraud and manipulating the price of CEL. Prosecutors said he and Roni Cohen-Pavon, the firm's chief revenue officer, had secretly sold their own CEL at inflated prices while urging customers to buy, with Mashinsky making about $42 million. The same day the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Trade Commission all sued. Mashinsky was released on bail.

Cohen-Pavon pleaded guilty in September 2023 and agreed to cooperate. On 3 December 2024 Mashinsky pleaded guilty to two counts, commodities fraud and securities fraud, and admitted that from 2018 to 2022 he had misled customers by calling their deposits safe while making up the company's profitability and putting their money into unsecured loans and undisclosed risky bets.

Twelve Years

On 8 May 2025, Judge John Koeltl in Manhattan sentenced Mashinsky, then 59, to 12 years in prison and ordered him to forfeit $48,393,446. Prosecutors had asked for 20 years; his lawyers asked for one year and a day. "He preyed on hope," Assistant US Attorney Allison Nichols told the court. The judge called the crimes "extremely serious". Mashinsky cried and said he was "truly sorry". Cameron Crewes, a member of a Celsius victims' committee, told the court that nearly 250 Celsius customers had died before seeing justice or being adequately compensated.

Cohen-Pavon was sentenced in May 2026 to time served and one year of supervised release, after prosecutors credited his help against his former boss. On 9 October 2026 New York Attorney General Letitia James announced a settlement that permanently bans Mashinsky from the securities, commodities and crypto industries and could cost him up to $35 million more, payable if he fails to hand over a further $10 million to the federal government or does not serve his full sentence. He has also asked a court to vacate his sentence.

The Money Back

Celsius left bankruptcy on 31 January 2024. Creditors received a mix of bitcoin, ether and cash, plus shares in Ionic Digital, a new bitcoin mining company built from Celsius's old mining business. By August 2024 more than $2.5 billion had gone to about 251,000 creditors.

The estate then went after money elsewhere. In August 2024 it sued Tether, the company behind the largest dollar stablecoin (a crypto token designed to be worth exactly one dollar), claiming Tether had improperly sold about 39,542 bitcoin that Celsius had posted as collateral in June 2022. Tether called it a "baseless shakedown" but settled in October 2025 for a reported $299.5 million. About $257 million of that went into a fourth distribution of $344.4 million, announced in January 2026 and paid from February. A third payout of $220.6 million had gone out in August 2025.

By August 2026, according to the New York Attorney General's office, creditors had received more than $3.4 billion. That is real money. It is also less than the $4.7 billion Celsius owed them, paid years late, and for many customers the difference was the savings they had been told were safer than a bank.