Celsius Examiner Found Customer Assets Fueled CEL Purchases

A court-appointed examiner in Celsius Network’s Chapter 11 case filed a final report on January 31, 2023 finding that the crypto lender’s public account of its business diverged sharply from how it actually operated. Examiner Shoba Pillay reported that Celsius used customer assets to fund operations and rewards, spent heavily buying its own CEL token and, in some instances just before withdrawals were frozen, used new customer deposits to satisfy other customers’ withdrawal requests.

The filing gave creditors and the wider digital-asset industry an unusually detailed account of the risks hidden inside a company that had marketed itself as a safer, community-centered alternative to traditional finance. Celsius had entered bankruptcy in July 2022. The January 31 report did not decide claims, impose liability or declare Celsius a Ponzi scheme; it documented facts and internal communications for the bankruptcy court.

The rewards model did not pay for itself

Pillay’s report found that Celsius promised more in customer rewards than its deployment of customer assets generated. From 2018 through June 30, 2022, reward obligations exceeded net revenue from customer deposits by $1.36 billion. That was the examiner’s company-record-based measure across the stated period, not a January 31 market loss, token valuation or estimate of creditor recovery.

The gap mattered because Celsius presented rewards as the product of lending and investment activity. In practice, according to the examiner, serious problems dated to at least 2020, when the company began using customer assets to cover operating expenses and rewards. Celsius also lacked reliable systems for tracking its assets and liabilities. The report described fragmented records and changing internal tools, limiting the precision with which management itself could understand exposures.

Liquidity stress became acute in June 2022. The examiner found that Celsius directly used new customer deposits to fund customer withdrawal requests in some instances between June 9 and June 12. On June 12, Celsius paused withdrawals. That sequence addressed a court-ordered question about whether new deposits met obligations to existing customers, but the report stopped short of supplying a legal conclusion that the entire business was a Ponzi scheme.

CEL purchases linked customers and insiders

The report also described a feedback loop around CEL, the company’s proprietary token. Celsius told customers it would buy CEL in the market to cover token-denominated rewards. The examiner found that the company bought substantially more than it needed for that purpose and spent at least $558 million purchasing CEL.

Those purchases were made from wallets containing commingled customer assets, according to the report, and helped support a market in which insiders were major sellers. Pillay reported that founder and former chief executive Alex Mashinsky sold or swapped at least 25.1 million CEL for at least $68.7 million between 2018 and the bankruptcy filing. Co-founder Daniel Leon sold or swapped at least 2.6 million CEL for at least $9.74 million, while co-founder Nuke Goldstein sold or swapped at least 2.5 million CEL for at least $2.8 million.

The figures describe the examiner’s reconstruction of transactions over several years. They are not profit calculations, event-day CEL trading data or proof that each purchase changed the token’s price by a measurable amount. The report’s institutional point was narrower: Celsius’s own buying was a material source of demand while company leaders could sell into that market, and customers were not told the full extent of the practice.

Public assurances met internal warnings

Pillay found repeated differences between public statements and internal knowledge. Celsius promoted transparency, security, liquidity and collateralization, while employees tracked inaccuracies in Mashinsky’s public remarks and sometimes edited recorded broadcasts without correcting what live audiences had heard. On June 10, 2022, Mashinsky said Celsius had billions in liquidity; the report said the risk committee had warned on June 9 that further withdrawals would deplete liquidity.

Celsius said on January 31 that it had cooperated with the examination and looked forward to working with creditors on a path out of bankruptcy. That was the company’s contemporaneous response, not evidence rebutting any particular finding.

For creditors, the report strengthened the factual record around asset shortfalls, token transactions and representations, but it did not determine ownership claims or recoveries. For the market, it showed why headline yield and token prices could not substitute for auditable liabilities, segregated customer assets, risk controls and transparent sources of revenue.