Celsius Network: From High Yields to Chapter 11 (2022) - QuickFinanceStories

"Banks are not your friends." That was Celsius Network's slogan. They promised to be different. Deposit your crypto.

Earn up to 18% interest. No banks. No middlemen.

Just yield. Millions believed them. This is the story of how that promise collapsed.

Celsius launched in 2018 with a bold pitch. Traditional banks pay you 0.1% on your savings. We'll pay you 18%.

All you have to do is trust us with your Bitcoin and Ethereum. CEO Alex Mashinsky became a crypto celebrity. Weekly AMAs.

Flashy marketing. A devoted community. He told his followers their funds were safe.

He compared Celsius to a savings account. It wasn't. Behind the scenes, Celsius was running a high-risk operation.

Behind the scenes, Celsius was running a high-risk operation.

They lent customer deposits to institutions. They staked crypto in volatile DeFi protocols. They made leveraged bets on tokens.

Yield came from everywhere and nowhere. The 18% had to come from somewhere. Nobody asked where.

The returns were too good. Then the market turned. When Terra Luna collapsed in May 2022, panic spread through crypto.

Token prices crashed. DeFi protocols unwound. And suddenly, Celsius couldn't generate the returns it had promised.

Users started withdrawing. More and more. Faster and faster.

On June 12th, 2022, Celsius froze all accounts. No warning. No explanation.

Just a message: "Withdrawals paused." 1.7 million users woke up to find their crypto trapped. Billions in customer deposits - locked. When the bankruptcy filing came weeks later, the truth emerged.

Celsius had lost money on bad trades. Lost money on hacks. Lost money on risky DeFi bets that went sideways.

Mashinsky had even been selling his own CEL tokens while telling customers to hold. The hole was over $1.2 billion. Users became unsecured creditors.

Standing in line behind everyone else. Waiting years to get pennies back. The lesson is ancient but always forgotten: If you don't control your keys, you don't control your coins.

If the yield seems too good to be true, it is. "Banks are not your friends." Neither was Celsius.