Alex Mashinsky, founder of Celsius, is feeling the heat

Alex Mashinsky, the founder of crypto lender Celsius, has built a cult following by tapping into public distrust of mainstream financial institutions.

Celsius, which launched five years ago and offers customers high interest rates on crypto deposits, has attracted 1.7 million customers under the slogan “#unbank yourself.”

Now the company itself is facing a crisis of confidence after it tried to stop customers from withdrawing money on Monday, citing "extreme market conditions" following a wave of outflows and losses on risky trades.

Just three days earlier, during his weekly hour-long YouTube broadcast to clients, Mashinsky had been in typically combative form, dismissing critics who warned of a looming liquidity crisis.

“All these naysayers and haters haven’t built anything,” Mashinsky told customers he calls Celsians. “Celsius has billions of dollars in liquidity, and we are providing immediate access to anyone who needs access to it.”

Because he doesn't keep this promise, Mashinsky struggles for the company's survival and his customers fear huge losses.

John, a Philadelphia commercial real estate agent who declined to give his last name, began withdrawing his money from Celsius last weekend but is still $150,000 in the hole. “It’s definitely a disappointment,” he said. "I probably didn't examine him as closely as I probably should have."

Mashinsky tweeted Wednesday that "this is a difficult moment" and that his team is "working non-stop."

Celsius Marketing has cast Mashinsky, known for his signature “banks are not your friends” T-shirt, as a Robin Hood character and self-help guru who helps customers achieve “financial freedom.” He has criticized rival crypto groups like Coinbase for returning more money to Wall Street investors than to their customers, and his personal website includes a tab on "failed ventures" that offers the lesson he learned as an "individual investor and entrepreneur."

One regret is the fate that some of his companies suffered in 2008. “When the recession hit, Alex’s decision to finance two of his businesses with debt turned disastrous as his lenders refused to be patient,” his website says.

As the frontman of the company, he indulged in stunts. He shared a video in 2020 of himself wearing a hoodie and jeans trying to pull a Chase sign from the wall of a bank branch on Park Avenue in Manhattan. “This is how we break the banks,” he wrote. “One Chase branch at a time.”

Born in Soviet Ukraine and raised in Israel, Mashinsky, 56, lives in Manhattan with his wife and six children. His career has taken him through more than half a dozen tech start-ups, from telecommunications to ride-sharing. He holds 35 patents and describes himself as co-inventor of Voice over Internet Protocol, the technology behind online telephony.

Since co-founding Celsius, Mashinsky, who nicknamed himself "the Machine," has pursued rapid growth, taking his asset base to a high of $25 billion last year and WestCap, a fund run by former Blackstone and Airbnb executive Laurence Tosi.

“The name of the game for crypto retail lenders has been user growth at all costs,” said Max Boonen, founder of crypto broker B2C2. He said the pressure to offer high interest rates led companies to make risky investments "often with unfortunate results."

In the tight-knit circle of crypto founders and CEOs, some were suspicious of Mashinsky. “They ran the company very aggressively,” said one investor who considered putting money into Celsius but decided against it. “He was a risk-taker.”

Mashinsky declined to comment.

Several executives said they avoided investing or doing business with Celsius because they didn't trust Mashinsky or would borrow from Celsius but not make loans.

Another investor said Celsius has been found with money tied up in crypto blasts too often, such as: B. with collapsed coins Terra and Luna, or with major hacks. But “Alex, like an Energizer bunny, just keeps going,” he said.

Privately, crypto executives have worried for at least a year that Celsius' risky lending looked like "an accident waiting to happen." Mashinsky always rejected the criticism.

“From a risk perspective, we are probably one of the lowest-risk companies that regulators around the world have ever seen,” he told the FT last year, citing the company's ability to weather sell-offs of more than 50 percent in 2020 and 2021. "There is no bank in England that can sustain a 53 percent loss without going out of business. That's what's really ridiculous here."

Brett DeLuca, a Los Angeles actor, is familiar with Mashinsky's bold claims from his weekly webcasts. "I would watch his promo thing every Friday. He seemed pretty knowledgeable," said DeLuca, who started using Celsius early last year. He has $20,000 with the company.

Mashinsky's low profile this week is unnerving for DeLuca. "He likes being in front of the camera. That's who he is," he said. “If he doesn’t get out of here in a week or two, I’m worried I’ll lose my 20,000.”