A few months before suspending withdrawals, and then declaring bankruptcy, the CEO of Celsius allegedly sold customers’ Bitcoin and then bought them back at a loss.
Celsius: BTC transactions with customer funds
This was revealed by the Financial Times, claiming that Alex Mashinsky allegedly took control of the company’s trading strategy months before the bankruptcy.
Citing unnamed sources with knowledge of the situation, Mashinsky was worried at the beginning of the year that the Fed would raise interest rates and decided to take matters into his own hands by ignoring the advice of experienced traders with decades of experience.
In fact, he apparently ordered the company’s trading staff to sell hundreds of millions of dollars worth of Bitcoin they were holding on behalf of their clients, and then to buy them back the next day. The problem is that in the meantime, the prices went down, so the repurchase the next day would have been done at a loss.
With this risky strategy, Mashinsky would have caused Celsius to lose as much as $50 million in January alone, which is the month in which the price of BTC fell from $48,000 to $38,000, with a low peak at $33,000.
It is worth noting that the Fed‘s first rate hike occurred in March, which is about a couple of months later.
So on the one hand, Mashinsky was right to fear a rate hike, but on the other hand, he was wrong to sell and buy back the BTC of Celsius customers within 24 hours.
Celsius’s failed strategy
The then CIO (Chief Investment Officer) of Celsius, Van Etten, disagreed with this strategy, which turned out to be effectively a failure, so much so that he then chose to resign in February.
While the official rationale is that the collapse of the crypto market was basically all that was behind the company’s failure, the Financial Times report sheds new light on the soundness of the company’s management. In fact, the losses generated in this way may have played a not insignificant role in its failure.
Moreover, according to other rumors, Grayscale allegedly offered Celsius the opportunity to liquidate its position on GBTC to limit its losses, but Mashinsky declined, ending up accumulating an overall loss on GBTC of $125 million.
These revelations, if confirmed, could drastically alter the ongoing corporate restructuring process, possibly even leading to a lawsuit against Mashinsky and corporate management.
The curious thing is that the price of the CEL token has risen significantly in recent times, although it is now 10% lower than it was yesterday. It is indeed still 34% higher than the price a week ago, and as much as 210% higher than a month ago. However, it remains 70% below the highs.