Alex Mashinsky, the founder of crypto lender Celsius, has built a cult following by exploiting public distrust of traditional financial institutions.
Launched five years ago, Celsius, which offers its 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 its decision on Monday to block customers from withdrawing funds, citing ‘extreme market conditions’ following a wave of outflows and losses on risky transactions.
Just three days earlier, during his weekly one-hour YouTube broadcast to clients, Mashinsky had been in typically pugnacious form, dismissing critics who warned of an impending liquidity crunch.
“All these naysayers and haters built nothing,” Mashinsky told his clients, whom he calls Celsians. “Celsius has billions in liquidity and we provide immediate access to anyone who needs it.”
His failure to deliver on that promise left Mashinsky fighting for the company’s survival and his customers fearing huge losses.
John, a Philadelphia commercial real estate broker who declined to give his last name, began withdrawing his money from Celsius last weekend but still has $150,000 trapped. “It’s definitely a disappointment,” he said. “I probably didn’t watch it as much as maybe I should have.”
Mashinsky tweeted on Wednesday that “it’s a tough time” and that his team is “working nonstop.”
Celsius Marketing has cast Mashinsky, known for his “Banks Are Not Your Friends” t-shirt, as the Robin Hood figure and self-help guru who will help customers achieve “financial freedom.” He has criticized rival crypto groups such as Coinbase for making more money to Wall Street investors than to their clients, and his personal website includes a tab on “failed companies”, offering the lesson he learned as a “maverick investor and entrepreneur”.
One regret is the fate some of his businesses suffered in 2008. “When the recession hit, Alex’s decision to leverage two of his debt-ridden businesses proved disastrous as his lenders refused to be patient. “, says its website.
As the leader of the company, he indulged in stunts. He shared a video in 2020 of himself in a hoodie and jeans trying to remove a Chase sign from the wall of a bank branch on Park Avenue in Manhattan. “This is how we take the banks apart,” 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 carpooling. He holds 35 patents and has described himself as a co-inventor of Voice over Internet Protocol, the technology behind online telephony.
Since co-founding Celsius, Mashinsky, who dubbed himself ‘the machine’, has continued rapid growth, increasing his asset base to a peak of $25 billion last year – and attracting investment from the Canadian pension fund Caisse de dépôt et placement du Québec and WestCap, a fund led by Laurence Tosi, former executive of Blackstone and Airbnb.
“The name of the game for crypto retail lenders was user growth at all costs,” said Max Boonen, founder of crypto broker B2C2. He said the pressure to offer high interest rates has led companies to risky investments “often with unfortunate results”.
In the close-knit circle of crypto founders and CEOs, some were wary of Mashinsky. “They were very aggressive in the way they ran the business,” said an investor who considered putting money into Celsius but decided against it. “He was a guy who took high risks.”
Mashinsky declined to comment.
Several executives said they avoided investments or deals with Celsius because they lacked confidence in Mashinsky or would borrow from Celsius but not lend to it.
Another investor said Celsius has too often been found with money tied up in crypto explosions, such as Terra and Luna crash coins, or major hacks. But “Alex, like an Energizer bunny, keep going,” he said.
Privately, crypto executives have worried for at least a year that risky Celsius lending looks like “an impending accident.” Mashinsky has always rejected criticism.
“From a risk perspective, we’re probably one of the least risky companies regulators around the world have ever seen,” he told the FT last year, citing the company’s ability to face sales of more than 50% in 2020 and 2021. “There is no bank in England that can suffer a 53% withdrawal and not close its doors. That’s what’s really laughable here.
Brett DeLuca, an actor from Los Angeles, knows Mashinsky’s bold claims in his weekly webcasts. “I watched his promo every Friday. He seemed pretty knowledgeable,” said DeLuca, who started using Celsius early last year. He has $20,000 stuck with the company.
Mashinsky’s low profile this week is unnerving for DeLuca. “He likes to be in front of the camera. That’s who he is,” he said. “If he doesn’t come out here in a week or two, then I’m afraid I’ll lose my 20k.”