Celsius Network founder and former CEO Alex Mashinsky allegedly withdrew $10 million from the crypto lending platform just weeks before the company froze clients’ funds and filed for bankruptcy.
Sources in the Financial Times quoted the withdrawal as saying Mashinsky withdrew the funds “in mid-to-late May” before suspending all withdrawals on 12 June.
Celsius was a popular crypto lending platform with 1.7 million customers and $25 billion in assets under management, but prevailing crypto market conditions ultimately left the company with a $2.85 billion hole in its balance sheet.
This led Celsius to suspend customer withdrawals in June before filing for Chapter 11 bankruptcy in July as Mashinksy sought to restructure and revive the company to be based on crypto custody services.
The withdrawal raises questions about whether Mashinsky knew in advance that the company would freeze client funds and withdrawals.
However, a spokesperson for Celsius told the FT that at the time the founder withdrew the cryptocurrency to pay state and federal taxes.
“In the nine months leading up to this withdrawal, he consistently deposited cryptocurrency equal to the amount he withdrew in May,” the spokesperson said, adding that Mashinsky and his family still have $44 million worth of cryptocurrency frozen on the platform. .
Meanwhile, sources told the Financial Times that the departure was pre-planned according to Mashinsky’s estate plan.
Almost $8 million of the withdrawn assets were used to pay income taxes related to the income generated from the assets, while the remaining $2 million was generated from the platform’s original token (CEL).
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Questions will likely be answered when Celsius takes the relevant transactions to court in the coming days as part of the crypto lender’s financial disclosures.
There is also a possibility that Mashinsky will be forced to return $10 million, because during the 90 days before filing for bankruptcy, the company’s payments to creditors can be reversed under US law.
Mashinsky stepped down as Celsius CEO on September 27, saying his role had “become more of a distraction”, but said he would continue to focus on finding a plan to repay creditors.