Alex Mashinsky, the founder and CEO of crypto lending platform Celsius Network, took charge of his company’s trading strategies, overriding the inputs of “executives with decades of finance experience,” Financial Times reported on Tuesday. Several actions taken under the direction of the Celsius boss contributed to the current bankrupt state of the platform.
Celsius CEO Hijacked Trading Role
Among the several actions carried out by the Celsius boss, he oversaw the sale of “hundreds of millions” of Bitcoin in January without verifying the accurate holdings of the company. Mashinsky might have intended to short the asset, as he moved “around huge chunks of bitcoin.” However, such acts only brought losses for the platform, as it bought back the asset at a higher price.
Another loss suffered by Celsius was an investment in the Grayscale Bitcoin Trust (GBTC), a digital product offered by Grayscale Investments. The report revealed that Celsius bought 11 million GBTC (approximately $400 million) when it traded at a premium in September 2021.
As GBTC traded at a discount of 15%, Celsius was offered a chance of selling the asset at $340 million in September, but Mashinsky disapproved of the trade, hoping that the discount will drop further to enable the company to at least retrieve most or all of its $400 million deposit. However, Celsius finally sold the holdings at a discount of 25% in April, losing $100 million in the process.
Celsius added to its pain by borrowing from other crypto-based companies, using its assets under management (AUM) as collateral. With the arrangement, the crypto lender was exposed to possible losses that could arise from a downtrend in the crypto market, where a large number of users tend to liquidate funds from Celsius.
Following the losses incurred by Celsius, the company suspended withdrawals of users’ funds in June. Thereafter, the troubled lender filed for bankruptcy protection from its customers to whom it owes $1.2 billion worth of funds.
Another report revealed that Timothy Cradle, a former Celsius executive, commented on the insolvent state, noting that the platform exercised poor management of risks, which contributed to its insolvency. Meanwhile, the platform has yet to refund users’ funds.
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