Alex Mashinsky took control of Celsius' trading strategy months before the bankruptcy

In January, Celsius Network boss Alex Mashinsky gathered his investment team to tell them that he would take control of the crypto creditor's trading strategy before an upcoming meeting.

The prices of popular cryptocurrencies such as Bitcoin and Ether had fallen from their all -time highs, and the former telecommunications entrepreneur said Celsius had to protect himself from further declines. A restrictive result, he was convinced of that, could bring the crypto prices into collapse.

In the days before the Fed's meeting, Mashinsky personally managed individual trades and overridden managers with decades of financial experience, such as several people familiar with the matter.

In one case, Mashinsky ordered the sale of Bitcoin worth hundreds of million dollars and refused to check again about his own stocks about Celsius' often unreliable information. Celsius-which at that time held $ 22 billion of customers from customers at the time-bought Bitcoin back a day later.

"He ordered the dealers to exchange the book for poor information," said one of the people. "He thrown huge Bitcoin blocks around."

Another person who is familiar with the events said that Mashinsky had announced his views because of his knowledge of the cryptoma markets, but insisted "that he does not lead the merchant table".

Mashinsky's fears did not confirm at short notice. The FED confirmed plans to increase interest and the cryptoma markets twitched with its shoulders. Celsius made trade losses of $ 50 million in January, said some people, although it is not clear how much Mashinsky was to be attributed.

The events that have not been reported previously underline the tense internal dynamics at Celsius in the months before the bankruptcy application in July, including his weak systems for pursuing assets, Mashinsky's fears before a downturn and his willingness to deal directly with a typical boss directly into trading decisions of great financial institutions.

Celsius built up by accepting crypto from its customers and promising them breathtaking returns that generated it by using the tokens in the markets for digital assets. His hundreds of thousands of customers are now faced with considerable losses in the crypto that they have entrusted to the company that has a hole of $ 1.2 billion in its balance sheet.

The lawyers of Mashinsky and Celsius, Kirkland & Ellis, have informed the court in New York that the company was not driven through mismanagement, but by the broader slump in crypto-asset prices this year. Lawyers, which represented the unsecured creditors of Celsius, mostly his customers have sworn to examine the behavior of Mashinsky.

A lawyer from Mashinsky rejected a statement. Celsius and his lawyers in Kirkland did not answer a request for comment. In a submission to the insolvency court last month, Mashinsky said that Celsius' assets had grown faster than his ability to invest it, and admitted that "what it turned out afterwards as certain bad decisions about the use of assets" had made.

Trade with "high conviction".

At the beginning of the year, Celsius had just completed a company's trust in the amount of $ 600 million, which was led by two major investors, Canada's second largest pension fund Caisse de Dépôt et Placement du Québec and the US investment group WestCap.

The financing round in December 2021 rated Celsius with $ 3 billion. The rapidly growing lender, which was founded in 2017, boasted to hire "traditional financial managers". But problems bubbled under the surface.

Although Mashinsky claimed to accept Celsiuss business, to accept and lend crypto interlocks, it was certain-he insisted publicly that it was not with customer assets-the company had suffered great losses from crypto tokens that did not disclose the customer.

An incident concerned a lender based in the USA named Equitiesfirst, which was not able in July 2021, Bitcoin worth 500 million

Another, previously not registered, concerned a considerable investment in the Grayscale Bitcoin Trust, the world's largest Bitcoin fund, whose GBTC units offered investors a tradable product that traced digital tokens.

Celsius had bought in GBTC when it was traded in the fund with a surcharge compared to the underlying Bitcoin. By September 2021, Celsius held 11 million GBTC, which at the time had a value of around $ 400 million, but were traded on the net inventory value of the trust with a discount of 15 percent.

Celsius was offered a deal for exit from the position this month, which would have reduced the company's losses, but Mashinsky blocked the sale with the argument that the discount could lower, two people familiar with the matter. Instead, it worsened. Celsius would only completely dismantle his position half a year later in April when the discount was 25 percent.

The company's total losses at his GBTC trade were, according to a person familiar with the matter, to around $ 100 to $ 125 million.

Celsius had partially compensated for his losses by loans at other crypto ventures. It was pledged by crypto tokens, which was held as a security for loans from stablecoins-the equivalent of dollar in crypto-which it would use to buy crypto-assets to replace the lost, said several people familiar with the matter.

These agreements made Celsius vulnerable if the crypto prices were to fall strong. Customers could reclaim their crypto, while Celsius also had to send more to his lender than additional security for his stablecoin loans.

The company would have little of its own liquidity in such a situation. According to the matter, Celsius had paid more interest for tokens such as Bitcoin and Ether to customers than generated by his investments. And it invested a large part of the 600 million dollars that investors collected under the leadership of CDPQ and Westcap in its capital-intensive crypto mining business and the takeover of an Israeli start-up, said Kirkland last month before the bankruptcy court.

On Sunday, Celsius announced that his current monthly net cash flow was significantly negative. Between August and October, the company estimated that it would lose $ 137 million, which was largely due to its mining business. The figures include restructuring costs of $ 33 million

balance sheet figures that were previously disclosed in the bankruptcy proceedings showed that Celsius's liabilities were already greater than his assets in March of this year, apart from the stocks of his own digital token. Two people familiar with the matter said this was the case since 2021.

In January 2022, a moment of the crisis seemed to have come. The company had had to accept most of the month due to the decline in crypto prices. On a call on January 21, the Friday before the Fed meeting, Mashinsky told his investment team that the next week would be the most formative of her careers.

"He was firmly convinced of how badly the market could move south. He wanted us to start reducing the risk, whatever Celsius it could," said one of the people familiar with the events. Not everyone agreed.

In the coming days, Mashinsky repeatedly argued with his then Chief Investment Officer Frank van Etten, a former Nuveen and UBS manager, about which business Celsius should do, but also that Mashinsky interferes in such decisions.

van Etten, who joined September 2021, left the company in February this year, according to its LinkedIn entry. In a press release on January 14, Mashinsky named his arrival at Celsius as an example of "top -class talents" entering the company. Van Etten said he could not comment on it at the moment.

The sale and bitcoin ordered by Mashinsky took place only one or two days before the Fed meeting. One reason why he had pushed for the sale of Celsius was associated with Equitiesfirst 'emission in 2021.

equities, Celsius Bitcoin and Celsius had secured this risk by buying Bitcoin before repayment. Mashinsky argued that Equitiesfirst could pay back its Bitcoin debt faster in the event of falling courses.

In this case, Celsius would have predicted more Bitcoin than is currently predicted. It usually tried to maintain a neutral position in relation to its crypto stocks in order to compensate for assets and liabilities. By selling Bitcoin now before the prices fall, Celsius could benefit from it, argued Mashinsky.

"It was not an irrational thought," said another, who was familiar with the events, but there was simply no evidence that equities would repay faster. "There was a lot of speculation," they added.

equities report said: "We made an agreement long before the date mentioned in January. Any change of this agreement would have required the consensus of all parties." The company added that all its obligations to Celsius would fulfill.

Mashinsky's fears about the market proved to be at least inappropriate. While the FED plans for interest rate increase in March confirmed, there was no break -in of crypto prices by May. In fact, the Bitcoin Prize recovered in the weeks after the FED meeting in January.

The board and the Celsius investors West Cap and CDPQ were then presented to the board of directors and the Celsius investors in February an internal test report, in which it was recommended to speed up investments in the company's technology. Westcap and CDPQ rejected an opinion.

The report found that the examination of Mashinsky was requested. According to two people familiar with the matter, it included the period from January 1 to 21. It is unclear why the exam did not include the trade immediately before the Fed meeting.

The Celsius employee, who headed the internal revision, a former banker with almost two decades of experience in internal revision and control, was taken shortly afterwards to work on new commercial product and partnership ideas.