# Celsius Network (2017 – 2022)

- URL: https://girisimcikafasi.com/en/startup-graveyard/celsius-network/
- Sector: Crypto and blockchain
- Country: United States
- Total funding: $494 million
- Cause of closure: Fraud

## What did it do?

Celsius Network was a platform where users could deposit crypto assets such as Bitcoin and Ethereum to earn interest, or pledge them as collateral to take out loans. Headquartered in Hoboken, New Jersey, the company ran offices in four countries and served customers worldwide. It made its money from lending, Bitcoin mining, token sales and crypto trading on its own account.

## Why did it shut down?

In June 2022, amid a sharp market sell-off, the company indefinitely froze all withdrawals and transfers, citing extreme market conditions. After its Chapter 11 filing a month later, it emerged that the balance sheet had a USD 1.2 billion hole; the company owed users USD 4.7 billion. An independent examiner's report noted that an internal source had described aspects of the business model as Ponzi-like. A settlement with the FTC banned the company from handling consumer assets, and the SEC charged both the company and Mashinsky. Mashinsky pleaded guilty to two charges in December 2024 and was sentenced to 12 years in prison in May 2025.

## The story

In mid-June 2022, a crypto company that claimed 1.7 million customers switched off the withdrawal button in its app. Shortly before, founder Alex Mashinsky had told users on a livestream that "Celsius has billions of dollars in liquidity", assuring them they could get at their money whenever they wanted. The decision, which the company blamed on market conditions, deepened the slide in crypto prices still further.

Celsius was founded in 2017 by Mashinsky, Daniel Leon and Nuke Goldstein, and in March 2018 it raised USD 50 million from the initial offering of its own token, CEL. The model was simple: users deposited crypto and earned interest, and anyone who wished could pledge their holdings as collateral for a loan. The company said it paid out up to 80 per cent of its revenue to users as interest, offering annual yields of up to 17 per cent. In October 2021 it raised USD 400 million in a round led by WestCap and the Canadian pension fund CDPQ, reaching a USD 3 billion valuation. By May 2022 it was managing around USD 12 billion in assets and had extended more than USD 8 billion in loans.

The collapse took a month. The company laid off a quarter of its staff in early July and filed for Chapter 11 bankruptcy on 13 July 2022. A filing the next day showed a USD 1.2 billion hole in the balance sheet; of USD 5.5 billion in total liabilities, USD 4.7 billion was owed to users. In January 2023 the court ruled that, under the terms of service, the assets deposited by some 600,000 customers belonged to the company, leaving those customers as unsecured creditors. An independent examiner's report, meanwhile, noted that an internal source had found aspects of the business model Ponzi-like.

The legal fallout was heavy too. In July 2023 the FTC announced a settlement banning the company from handling consumer assets, and the SEC brought charges against Celsius and Mashinsky. Having initially pleaded not guilty, Mashinsky pleaded guilty in December 2024 to two charges, one of commodities fraud and one of securities fraud, and in May 2025 he was sentenced to 12 years in prison. The company emerged from bankruptcy in January 2024 and began distributing more than USD 3 billion in crypto and cash to creditors, shutting down its apps in February 2024.

The lesson of Celsius is how fragile a product can be in a crisis when it looks like banking but carries none of banking's safeguards. The promise of high interest fuelled growth; but with the risks behind that interest kept out of users' sight, the first tremor sent everyone rushing for the exit at once.

## Lessons

- If you promise high returns, show users plainly where those returns come from; yield you cannot explain will sooner or later become a hole you cannot fill.
- Your terms of service decide who owns the assets a customer deposits; burying that in the small print destroys trust completely the moment a crisis hits.
- Propping up your own token's price by buying it back on the market builds confidence in the short term and burns through your cash in the long term.

## Sources

- [Celsius Network](https://en.wikipedia.org/wiki/Celsius_Network)
- [Big crypto lender Celsius files for bankruptcy](https://techcrunch.com/2022/07/13/celsius-one-of-cryptos-biggest-lenders-files-for-bankruptcy/)
- [Celsius CEO Alex Mashinsky sentenced to 12 years in multi-billion-dollar crypto fraud case](https://www.cnbc.com/2025/05/08/celsius-ceo-alex-mashinsky-sentenced-to-12-years-in-crypto-fraud-case.html)
- [Crypto lender Celsius Network raises $400m as regulatory pressure grows](https://www.ft.com/content/b47c9499-f4a6-46f4-991b-e8f7f20d49e2)