Those who store their cryptocurrencies on the online ‘cryptobank’ Celsius Network have not been able to access their capital for days. Last week, the bank decided to temporarily freeze its assets due to liquidity problems.
Investors’ money is lent to investors through Celsius. Investors are promised high returns, but this is offset by risky investments.
Alex, like an Energizer rabbit, just keep going
Insiders tell the Financial Times that co-founder and CEO Alex Mashinsky is not crazy about a small risk. “He was a guy who took a lot of risks,” one says. “Alex, like an Energizer rabbit, just keep going,” says the other.
Alex Mashinsky grew up in Israel
Risky or not, what is certain is that Mashinsky has an eye for opportunity. He holds more than fifty patents to his name and has founded countless start-ups over the years. Mashinsky was born in Ukraine in 1965, but moved to Israel as a child.
Although he came from a communist country, the entrepreneurial blood flowed from an early age. As a teenager, Mashinsky bought seized items at customs auctions at a Tel Aviv airport. From video recorders to hair dryers, Mashinsky bought all kinds of electronics and then resold them at a profit.
Eavesdropping on telephone lines
Mashinsky not only proved to be a skilled electronics retailer, he also proved himself to have a nose for technology – even though he did not use it completely ethically. As a teenager, he liked to eavesdrop on public telephone lines in Israel.
He went so far as to get Israel’s national telephone service to threaten Mashinsky’s parents to interrupt their telephone lines. Mashinsky also made some mess out of it at university. He attended three courses without completing one.
Trade in toxic substances
After completing his military service in the Israeli Army, Mashinsky moved to New York City in the late 1980s. Here, in capitalist America, his trading skills would certainly benefit him, Mashinsky believed.
He moved into an apartment in Manhattan and began trading in toxic sodium cyanide from China to prospectors in the United States. Due to the big student protest in Beijing in 1989, the import of things came to a standstill, which caused Mashinsky’s business to come to a standstill.
My big deal was crushed
When this so-called Tiananmen protest was taking place in China, Mashinsky was sitting at a bar in New York. “I saw this guy standing in front of a tank and I asked the bartender what was going on,” Mashinsky said. “My big deal was crushed.” The fact that freedom did not go so well in China seemed to be a minor issue for the aspiring businessman Mashinsky.
The Ukrainian nevertheless recovered and started a life as a technician. He started several internet companies and successfully sold his shares in one of these startups – the telecommunications company Arbinet – in 2005. That same year, he started GroundLink, a kind of forerunner for Uber, which allows users to book taxis and limousines online.
Mashinsky got the idea for this company when he was waiting at the airport for a taxi that never showed up. A similar annoyance as Uber founder Travis Kalanick, who also resented taxis barely available. GroundLink was not as successful as Uber, although the service was eventually offered in 5,000 cities worldwide.
Missed by Alex Mashinsky
A modest success, but Mashinsky also made mistakes, he states on his own website. This contains a ‘failed options’ tab. For example, the businessman grabbed next to investments in Skype and Twitter.
The choice to finance its own businesses with debt during the 2008 crisis also proved disastrous because lenders had little faith in it. Mashinsky was left penniless.
Problems with Celsius
It may also seem to apply to customers at Celsius, the ‘crypto bank’ that Mashinsky founded in 2017 together with business partner S. Daniel Leon. On its website, Celsius aims to ‘put unique economic freedom in the hands of the people’.
But that ‘people’ can not access their investment assets at the moment. After bitcoin briefly reached its highest record in October last year, over $ 66,000, the currency has lost more and more of its value. Last weekend, the coin fell to less than 20,000 euros for the first time in a year and a half.
Investors are losing confidence
In parallel with this stock market drama, Celsius saw its capital under management fall sharply. In October last year, the company reported $ 25 billion, in May, Celsius had only $ 11.8 billion. Meanwhile, rumors surfaced about the reliability of the service. In response, Celsius positioned itself as a victim of “disinformation” earlier this month.
At the same time, investors seem reluctant to put more money into Celsius, with the result that more users want to withdraw their money from Celsius. Celsius was forced to freeze users’ funds, an emergency operation that has been going on for almost a week now.
Investors have their hands in their hair. Unlike ordinary banks, Celsius is not covered by a deposit guarantee scheme, which protects savers in the event of a bank failure.
I have USDC in my account that I want to use to repay my loan that has a margin call right now, but I can not even repay the damned loan due to the transfer stop. That’s ridiculous. If the market holds, celsius will liquidate my security even though I can pay my loan off !!!
– FlyingSpoon (@ flyingspoon8891) June 13, 2022
Painful costs also for Alex Mashinsky, who positioned himself as an anti-banker and was inevitably dressed in a T-shirt with ‘Banks are not your friends† Celsius embraced the cry ‘free yourself ‘ as the company slogan.
In a video from 2020, Mashinsky in Manhattan pulled a sign of a branch of bank JPMorgan Chase off the wall. ‘This is how we shut down the banks’, wrote the brand new vandal (free after Dirk Scheringa). “One Chase board at a time.”
While JPMorgan Chase still stands proud two years later, it looks like Celsius may topple. Karma does not exist, but one would almost begin to believe it.