Former Celsius CEO Withdrew $10 Million in Lead Up to Platform Insolvency

Alex Mashinsky, the founder and former CEO of Celsius, allegedly withdrew about $10 million in funds from the platform a few weeks before it froze customer withdrawals and declared bankruptcy.

The allegations were made in a recent report from the Financial Times, which pored through records of Masinsky’s dealings in the run-up to the Celsius insolvency.

Questionable Transactions

According to the news source, Mashinsky had been moving money through May, although it is unknown where he moved the funds or what he used them for. A source explained to the Financial Times that Mashinsky had been conducting the transactions as part of his state and federal tax payments and that the former CEO had consistently deposited funds into Celsius in the nine months leading up to the $10 million withdrawal.

Another source explained that the withdrawal had been pre-planned and aligned with Mashinsky’s estate planning. As the news medium explained, about $8 million worth of assets were used to pay income taxes from the yields Mashinsky derived. The remaining $2 million was made up of Celsius’ native token, CEL.

Although Mashinsky and his family are said to have about $44 million in funds frozen on Celsius currently, there is a possibility that he could be forced to return the funds he withdrew. The U.S bankruptcy law states that in the 90 days leading up to a bankruptcy filing, a company’s payments could be reversed for the benefit of the creditors.

The Celsius Saga Continues

While Mashinsky’s transactions could raise questions about whether he knew of the company’s fate beforehand, the platform continues to wrangle with its bankruptcy proceedings. Earlier this month, Celsius filed with the U.S. Bankruptcy Court for the Southern District of New York for approval to sell its stablecoin holdings, valued at $23 million. It also requested permission to reopen withdrawals for select customers, citing a need to restructure its business model to focus on custody.

For account holders with outstanding loans on the platform, Celsius today filed a statement to help answer your questions and offer greater clarity. https://t.co/GZfmtTtn13

— Celsius (@CelsiusNetwork) October 1, 2022

However, that plan now appears to have hit a snag. In a joint filing, the Texas State Securities Board (SBB), the Texas Department of Banking, and the Vermont Department of Financial Regulation all objected to the plan.

As they explained at the time, over 40 states in the country were investigating Celsius’ activities before its bankruptcy as they believed it could have offered unregistered securities. The Texas financial regulators also added that Celsius could resume non-compliant activities if it sold off its holdings.

The Department of Justice (DoJ) has objected to the restructuring plan in a further blow to Celsius. In a filing with the Bankruptcy Court for the Southern District of New York, a U.S. Trustee for the DoJ, William Harrington, explained that Celsius’ financials still show a significant lack of transparency. And until an independent examiner report has been filed, key decisions such as this should not be considered.

Simon Dixon, the founder of BnkToTheFuture, which was Celsius’ lead investor, had initially forecasted that Celsius would try to repay its creditors using its CEL tokens as part of a reorganization plan. However, he believes that this plan won’t get past regulators.

As Dixon sees it, Celsius might have to go the way of Voyager and sell off its assets to repay its creditors.

to be clear — in Voyager, our bids are generally determined by fair market price, no discounts; goal isn't to make money buying assets at cents on the dollar, it's to pay $1 on the $1 and get the $1 back to customers.

If we were to get involved in Celsius, it would be the same.

— SBF (@SBF_FTX) October 2, 2022

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