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Shame, suicide attempts, ‘financial death’ — the devastating toll of a crypto firm’s failure

Alex Mashinsky, founder and chief executive officer of Celsius Network Ltd., during a panel session at the Blockchain Week Summit in Paris, France, on April 13. (Benjamin Girette/Getty Images)

In September last year, Alex Mashinsky was riding high.

Appearing on a panel sponsored by Johns Hopkins University to talk about bitcoin and other cryptocurrencies, Mashinsky, the chief executive of the crypto banking firm Celsius, exuded confidence about the future of crypto and disdain for traditional banks and traditional currencies.

“The banks have abused their power,” Mashinsky said, citing the discrepancy between the interest that banks pay on dollar deposits — an annualized rate of less than 1% — and the nearly 9% that Celsius paid on deposits of some digital currencies. “Is the real value of money 0.1%?” he asked. “Or is the real value of money … 8.8%?”

I am one of the little guys…. It was my nest egg. Now when I go to work, I drink water and eat any scraps I can find for lunch…. I am in deep depression and do not know if I can pull myself out of this.

Brandon Lawrence, Celsius customer

To hundreds of Celsius’ 1.7 million customers, the value of the $11.7 billion in assets they deposited with the firm might as well be zero.

“Mashinsky always talked very confidently about how strong Celsius was and how much better than banks,” recalls Harold M. Lott, 35, a Nashville-area nurse who had as much as $14,000 in cryptocurrency assets deposited at Celsius at the peak of the crypto market.

“He never gave any indication that there was a problem,” Lott says. “But suddenly, out of the blue, they just stopped all transfers.”

That was on June 12, when the company froze all customer withdrawals and other transactions. On July 13, Celsius filed for bankruptcy protection, revealing that it owed customers $4.7 billion but had only $170 million in cash on hand. All told, the company declared a $1.2-billion discrepancy between its assets and liabilities.

Lott is among hundreds of small investors who have written to Bankruptcy Court Judge Martin Glenn, who is overseeing the case, to…

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