Celsius Purchased $CEL Token as CEO Alex Mashinsky Dumped It

*Celsius CEO Alex Mashinsky with wife Krissy*

Disgraced crypto lender and exchange Celsius Network used customer funds to inflate the price of its native token, enriching CEO Alex Mashinsky and pushing the company toward insolvency, according to a new report.

“Celsius appears to have spent over $350 million purchasing its own crypto token CEL on exchanges, even though it already had billions of dollars worth of CEL in its treasury,” Arkham Intelligence researchers said in the Friday report. “At the same time, blockchain addresses associated with Celsius CEO Alex Mashinsky appear to have sold nearly $40 million of CEL throughout their lifetime, sometimes on the same exchanges where Celsius bought their own token with corporate funds, while publicly promoting the coin to Celsius customers.”

Arkham said the strategy appeared “to be at odds” with the company’s “public emphasis on institutional asset lending.”

Analysts noted that in public advertising, Celsius promised to pay interest rates of up to 7.87 percent APY to users who deposited their assets on the platform, in the form of its native CEL token. But instead of paying them using CEL the company held — which Arkham estimated to be around 48 percent of supply — it purchased “hundreds of millions of dollars” of the token “to meet liabilities to users.”

On-chain data indicates Mashinsky was using customer funds to bid up CEL but was dumping his own CEL allocations simultaneously… All while shilling it to his customers. Straight out of the Do Kwon playbook – exude confidence, shill hard, and sell into the ensuing liquidity. https://t.co/qmULHxHJAS

— FatMan (@FatManTerra) July 8, 2022

In sum, analysts said they observed $127 million in purchases between July 2019 and March 2021, in addition to $226 million since December 2021. They noted one effect of the strategy was enriching Mashinsky — while making it more likely the company would become insolvent.

“Celsius purchasing its customers’ in-CEL payments rather than collecting them through fees or distributing from the treasury tightens its margins as it adds another cost,” Arkham said. “On top of that, it expends capital that could otherwise be used to meet withdrawal requests, risking a liquidity crisis like the one Celsius is currently experiencing.

“One possible explanation is that Celsius purchases CEL rather than distributing it from the treasury in order to support the price of CEL by making it effectively deflationary,” they added. “Paying out CEL rewards from the treasury could flood the market and cause the token price to fall. Buying CEL to pay interest has the opposite effect, likely increasing its price and thereby the wealth of CEL holders, of which Alex Mashinsky is the largest, according to Celsius, with over 45 million CEL, more than the rest of the top 5 holders combined.”

The report marks the second week of unflattering headlines for the embattled company’s CEO. Mashinsky made news last week due to an allegation that officials blocked him during an attempt to leave the country, a claim the company denied.

Celsius froze its customers’ funds on June 13 amid a liquidity crisis, which included the prospect of a margin call on a $270 million MakerDAO loan. It successfully won the return on Thursday of $450 million in bitcoin collateral provided for that loan but remained silent on the issue of returning customer assets.

The company did not return a request for comment from GoblinCrypto.

You can read the full Arkham Intelligence report embedded above.