Celsius‘s ambition was to be the future of banking. However, their dream quickly became a nightmare. At the end of the day, it is always customers who pay for these failures, as demonstrated by Alex Mashinsky’s grandiose speeches, that ultimately could not help Celsius avoid a devastating outcome. A cautionary tale serves as a reminder that while boiling may seem beneficial in moments if done too long and with too much heat, you can completely ruin even your most reliable tools – such as Celsius did when they burned their own thermometer.
What Was the Purpose of Celsius?
Celsius had a vision for an improved banking system to provide users with more financial liberation and freedom. They captured the attention of curious investors and encouraged them to join their mission by emphasizing values such as community, trustworthiness, and transparency.
Celsius‘s groundbreaking Earn program provides users with the highest level of security for storing their cryptocurrencies, as well as an effortless way to generate passive income through borrowing or investing assets. This feature has been highly successful! During an Ask Mashinsky Anything (AMA) session, CEO Alex Mashinsky highlighted that user-owned cryptocurrency remains secure at all times, and any profits are redistributed back directly to customers!
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Celsius Manipulated the Market
When Celsius was first introduced in 2018 and 2019, CEL tokens were initially worth little. However, to make good on its promise of returns for customers as promised, Celsius began purchasing those tokens back so that it could pay users out. By the year 2020, though, they went into overdrive with their buying activity, aiming to dramatically raise the cost of CEL tokens. The results were remarkable: the CEL token saw more than a 14,000% return between March 2020 and June 2021. This increase in price mainly profited the project’s founders; Alex Mashinsky sold off at least 25 million tokens for an impressive $68 million gain, while S. Daniel Leon reaped a whopping $9.7 million from his investments!
And The Downfall Came…
Ultimately, Celsius failed to yield a sufficient return from its assets and had to cease purchasing CEL tokens. To make matters worse, it began using the BTC and ETH of platform customers for purchases just like FTX did – creating an alarming hole in the fund worth 300 million dollars that only grew further until surpassing 1 billion dollars.
When users withdrew their BTC and ETH from the platform in May and June 2022, this left Celsius with a deficit of stablecoins. With limited funds, they were forced to temporarily suspend user withdrawals on June 12th that same year. Celsius still holds 95% of all CEL tokens circulating today.
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