This is another part of "Faces of Crypto World " series.
As in any environment, especially when big money come into question, some very nasty guys could appear…
but this time all the situation doesn’t look so clear, and the person, Id like to describe is not so easy to judge ( what is for sure, of course I’m not in charge to judge anyone).
Alex Mashinsky (born in 1965) comes a Jewish family who lived in Ukraine. In the 1970s the whole family moved to Israel. As a chid, he was a talented tinkerer, well oriented at technologies – for example, he could tap into and use public phone lines in Israel.
Mashinsky used to attend to different universities where he majored in electrical engineering but did not graduate.
As an any Israeli citizen, he had to go serving to the Israeli Army, where he trained as a pilot and served in the Golani infantry units.
At the end of the 1980s, he left Israel and moved to the United States.
In the U.S.A Mashinsky has tied his opportunities in a variety of different industries, often connected with popular technologies. Due to several conflicts with cooworkers, Mashinsky has left his companies after a period of conflict or tension.
After moving to New York City, he began to run a business trading contracts for delivery of industrial chemicals from China.
After that experience, Mashinsky started to worked at A+ Systems, for a computer-based voicemail software company for phone carriers.
Using his wide knowledgeand technological skills he became an early developer of voice over Internet Protocol (VOIP) and established VoiceSmart, one of the first companies to offer computer-based VOIP phone service ( in1991).
In 1996, he founded Arbinet, a marketplace for VoIP telephone service - the platform wchich was allowing telecommunication companies to trade minutes, it was one of the first companies ofering services like that, so it was developing very well.
In 2005, he sold his stake in Arbinet, and started to do, what many prominent bussinessmen are supposed to do… no he didn’t go retirement on Bhamas or wherever he would like to.
He sold his stakes in Arbinet instead, and used part of the profits from the sale to start GroundLink company, it wasmainly based on services wchich allowed people to book limousine and car service from a smartphone or computer.
The companies also partnered with Gogo Inflight Internet to offer the free service on US flights.
Mashinsky's other company - Q-Wireless was one of the four companies that made up Transit Wireless, a joint venture to install wireless cellphone and free Wi-Fi internet service in the New York City Subway system. His company had obtained a contract to install the service at 277 below-ground subway stations in New York City ( in 2010).
During the years 2014-2016 he used to hold many lucrative positions, like:
Membership to the board of directors of Novatel, a provider of Wi-Fi hotspot products, or be a Global CEO of RTX, a London-based financial technology firm in the telecom industry
Mashinsky became involved in crypto in 2017, when his venture fund Governing Dynamics brought on blockchain company MicroMoney as a strategic partner.
Well, it seems that everything in his life goes incredibly impressive …unfortunately for him (and for an enormous number of investors) he decides to go into crypto market.
We all believe that, when an experienced, succesfull bussinesman takes care on fintech branch, nothing can go wrong… but, really, is it?
Alex Mashinsky and his two bussines partners: Daniel Leon, and Nuke Goldstein found lending company called Celsius in 2017.
At the begining it seemed quite promising as the company manager to collect $50 million in its initial coin offering (ICO) of the CEL digital currency in March 2018. A month later its main token was listed and traded on cryptocurrency exchanges, and, whats more, due to U.S. legacy, Celsius listed its currency as a security.
The company launched its mobile app (June of 2018).
In 2019, Celsius valuation was at $140 million.
What seems preety alarming, Celsius was a major buyer of its own token, buying CEL interest it owed to customers on the open market. Crypto analysis company Arkham Intelligence estimated that Celsius had spent $350 million on purchases since July 2019.
Celsius managed to raise $20 million through an equity crowdfunding to support its operations (August of 2020).
In the autumn of 2020, the price of Celsius's reached over 230% within one month.
During its best prosperity(2020-2021) Celsius obtained large amount on money from investors:
- December 2020, $3.31 billion in assets under management.
- January 2021, more than $4.5 billion in assets.
- October 2021, Celsius raised $400 million in new equity from investors (WestCap, the fund led by former Airbnb executive Laurence Tosi, and CDPQ –canadian retirement invest fund)
Meantime, an Israeli’s Celsius office employed 100 people, and started cooperation with Israeli cybersecurity company GK8 for $115 million.
Unfortunately, not everything went so well, some scratches had appeard:
- April 16, 2021- there was a phishing attact on Celsius customers, due to that a security breach had occurred in the company systems.
Also a legislation problems had begin:
Authorities in some of US states accused Celsius's interest-bearing cryptocurrency accounts containing an unregistered securities offering.[ The attorney general of New Jersey, Kentucky and Texas ordered Celsius to stop issuing interest-bearing cryptocurrency products via a cease-and-desist order.
In addition, Celsius pledged that one of its senior employees was the focus of an Israeli police probe associated with prior employment activities (26 of November 2021).
First signs of distress..
On April 12, 2022,U.S. Celsius platform announced that they will begin holding non-accredited investors’ coins in custody, where investors will no longer be able to add new assets and earn rewards. The company announced , that they had to follow a legilacy rules, after agreement with U.S. regulators.
The real problems began when the implosion of LUNA and UST- Algorithmic stablecoin terraUST (UST) and sister coin LUNA acted in a $40 billion collapse disrupting the cryptocurrency market and spurring $300 billion in losses across the cryptocurrency economy.
It affected consumer confidence in the crypto market, accelerating the onset of a “crypto winter – bear market” and an industry-wide sell-off that spurs a bank run-style series of withdrawals by Celsius users. This so called „coffin nail” had happened on May 2022.
About 1,7 milion investors freezed in fear, when Celsius announced halt of withdrawals, swaps and transfers in response to “extreme market conditions” (12th of June 2022), that only highlighted rumors that the platform has become deeply insolvent.
In spite of the fact that, Celsius hired restructuring expert Alvarez & Marsal to explore the firm’s options to mitigate the fallout of its mid-June swoon, it didn’t helped much.
…. The cesspool broke…
Celsius Network (CEL) announced on July 13 that it filed for Chapter 11 bankruptcy after a month of turmoil.
Six states have launched investigations into Celsius, with Vermont being the latest to sue.
„Court filings show that Celsius is around $1.2 billion in the red, with $5.5 billion in liabilities and $4.3 billion. It also looks like customers may bear the brunt of Celsius’ collapse, as the filings show that most of the liabilities, $4.7 billion, represent customer holdings.” (https://www.forbes.com/advisor/investing/cryptocurrency/what-is-celsius/).
The company extended hundreds of millions of dollars in uncollateralized loans, and invested hundreds of millions more in unregulated decentralized finance platforms, the lawsuit said.
Mashinsky, wearing t-shirts with slogans such as "banks are not your friends," carried on to falsely represent to investors that Celsius was generating high yield through low-risk investments, according to the legal filing.
Well, at this point Alex was right, nor bank, banksters or even Bankman (Sam – SBF) were his campany friends, the last one is believied to taking part in the fall of Celsius. At least, there are some traces leading to him.
I’m sure, the story will be continued…