[Serious] Alex Mashisnky, Daniel Leon, Nuke, and others sued

I lost low (now mid) 5 figures at Celsius, so I have been following it along pretty closely. I know a lot of people haven’t, and I would appreciate it if you all could please quit yelling that it was a obvious scam, it wasn’t. Hindsight is 20/20.

The Celsius Unsecured Creditors Committee (UCC) is responsible for representing all unsecured creditors (which is the victims of the scam/account holders).

I don’t believe that this has already been posted here, and if it was, I am sorry. I copied out a small amount of the complaint. The pdf is ~280 pages long, but the complaint itself is shorter. If you have time, read about 10 pages, and it is horrific the stuff that went on at Celsius.

Lies about CEL: “Celsius raised capital to fund its business through an initial coin offering, or “ICO,” of its own cryptocurrency, the CEL token. In the summer of 2018, Alexander Mashinsky, the co- founder, director, CEO, and public face of Celsius, announced that Celsius’ $50 million ICO was fully funded. It was off to the races. The ICO, however, was never fully funded. Mr. Mashinsky agreed to purchase $18 million of the CEL tokens that were not sold. But when the time came to pay, Mr. Mashinsky refused. Instead, at Mr. Mashinsky’s direction, Shlomi Daniel Leon, another co-founder of Celsius, extended the time by which Mr. Mashinsky had to purchase the tokens and reduced the purchase price. Ultimately, two years later, Mr. Leon let Mr. Mashinsky off the hook, and the $18 million in CEL tokens Mr. Mashinsky promised to purchase were added back to Celsius’ balance sheet.”

Public lies: “In contrast to Mr. Mashinsky’s public messaging, on the inside Celsius was a mess. Far from being safer than a bank, Celsius repeatedly failed to responsibly hold or invest the assets transferred to its platform by its account holders. In 2020, investment decisions were primarily made by Mr. Mashinsky and Harumi Urata-Thompson, Celsius’ Chief Investment and Financial Officer. Those investment decisions were made in an ad hoc manner, with hundreds of millions of dollars’ worth of cryptocurrency transmitted to counterparties with little to no diligence.”

They were tracking ~$10b of crypto on excel spreadsheets:

“By the spring of 2021, account holders had transferred over $10 billion of cryptocurrency to Celsius. Celsius tasked two employees with overseeing risk and sorting through the ad hoc deployments made by Mr. Mashinsky, Ms. Urata-Thompson, and other Celsius employees. To the extent Celsius tracked its billions of dollars of investments and various positions across the firm, it did so using a spreadsheet.”

They basically gave anyone loans with 0 due diligence, and they were unsecured ????

“Mashinsky sent billions in assets to KeyFi, Inc. (“KeyFi”)—an entity that Mr. Mashinsky and Hanoch “Nuke” Goldstein partially owned—to engage in staking and speculative investments. Customer assets were sent to KeyFi before an agreement was finalized. Celsius never created proper controls or oversight mechanisms to ensure KeyFi was using its assets as directed, and Celsius is now engaged in litigation with KeyFi to recover over $200 million of losses from that transaction. Celsius also provided hundreds of millions of dollars of Bitcoin (“BTC”) and Ethereum (“ETH”) collateral to a separate entity, Equities First Holdings (“EFH”), without even receiving basic financial information from the company. EFH refused to return Celsius’ BTC and now owes Celsius over $395 million.”

Used customer assets to pump the price of CEL:

“During this same period, Celsius used BTC transferred by customers to strategically purchase CEL tokens to inflate the token’s price. In late 2020 and early 2021, the Defendants realized that they had not accurately tracked Celsius’ assets and liabilities and, because the Defendants were using BTC to purchase CEL tokens, Celsius had significantly more BTC obligations than assets. As BTC prices skyrocketed and everyone in the crypto industry was making money, Celsius lost over $250 million—a fact that the Defendants did not realize until it was too late. After that incident, the Defendants knew that Celsius had to better track its assets and obligations—yet, the Defendants again failed to invest the proper resources into Celsius’ financial operations and instead turned to another ineffective, manually updated spreadsheet, which often misrepresented Celsius’ position by hundreds of millions of dollars.”

They somehow managed to lose billions during the bull market.

“The above-described loss was one of many large “poor asset deployment decisions” made by the Debtors in 2020 and 2021. During that time, Celsius operated at a multiple hundred million dollar loss. The returns from its investments were not sufficient to meet the bloated operating expenses incurred by the Defendants and the above-market interest rates the Defendants refused to reduce. All told, in 2021 alone, the Defendants lost over $1.2 billion.”

Insiders used customer assets to buy CEL, and then sold their own CEL to Celsius.

“As the losses mounted, Mr. Mashinsky, Mr. Leon, Ms. Urata-Thompson, and Mr. Treutler directed Celsius to continue spending hundreds of millions of dollars to buy CEL tokens on the open market to prop up the token’s price. Mr. Mashinsky, Ms. Urata-Thompson, and Mr. Johannes Treutler coordinated the timing, price, and size of purchases, each specifically intended to inflate the price of the token. As the largest holders of CEL tokens, Mr. Mashinsky, Mr. Leon, Mr. Goldstein and the other Defendants profited from the rising price. Mr. Mashinsky, Mr. Leon, and Mr. Goldstein also directly profited by secretly selling CEL tokens from their private wallets, often around the time when Celsius was purchasing CEL tokens. Between 2019 and 2022, Mr. Mashinsky sold more than $51.4 million of CEL tokens, Mr. Leon sold more than $8.6 million, and Mr. Goldstein sold more than $2.2 million. Those sales were often in direct violation of Celsius’ policy on trading CEL tokens.”

“Biggest” account holder: “Mr. Mashinsky would often preach that if account holders had questions about whether they should trust Celsius, they only had to look at him—the largest account holder and CEL token holder—who was putting his money where his mouth was and standing alongside them. Like many other things Mr. Mashinsky said to entice customers to transfer their hard-earned assets to Celsius, those statements were not true. Mr. Mashinsky refused to invest at the beginning, skimmed millions off the top through his secret sales of CEL tokens, and was the first one to jump as the Celsius ship began to sink.”

Here is a link to full complaint if you want to read it:

https://cases.stretto.com/public/x191/11749/PLEADINGS/1174903312380000000001.pdf