Celsius bankruptcy: a crypto lender that froze withdrawals

How did the Celsius crypto lender make money for depositors?

Celsius let users deposit cryptocurrency to earn interest, with rates that varied by asset and reached up to 6.2% on bitcoin. Users could also borrow against their holdings. Celsius said it returned up to 80% of its revenue to users and charged users no fees, and in June 2022 it reported 1.7 million customers.

A deposit that earns interest is a loan from the customer to the company. The company must then invest or lend the coins to earn the interest it pays. The customer therefore holds a claim on the company, and the claim is only as strong as the company’s use of the coins.

When did the Celsius withdrawal freeze happen, and why?

Celsius paused all customer withdrawals on 13 June 2022, citing extreme market conditions. The date fell weeks after the Terra Luna collapse, and crypto prices were falling across the market. A pause stops customers from reaching the coins they deposited, whatever their view of the market.

A freeze is the visible sign of a liquidity problem: the company does not hold enough coins that it can return on demand, even when its balance sheet shows assets that it cannot sell quickly. For the customer, the key fact is the date, because every coin deposited before it became a claim in the bankruptcy that followed.

What did the Celsius bankruptcy filing of July 2022 reveal?

Celsius filed for Chapter 11 bankruptcy on 13 July 2022, one month after the freeze. A declaration filed the day after reported a $1.2 billion deficit on the balance sheet. Total liabilities were $5.5 billion, including $4.7 billion owed to users.

The numbers show a gap between what Celsius owed and what it held. Chapter 11 gives a company time to restructure under court supervision, and it pauses most claims. In this case the filing opened the long process in which customers, as creditors, argued over what they were owed.

Who owned the crypto in Celsius deposit accounts after the ruling?

In January 2023, the presiding judge ruled that about 600,000 customers had deposited cryptocurrency that, under the company’s terms of use, belonged to Celsius. Those depositors became unsecured creditors, which means they joined the line of creditors without a claim on specific coins.

This ruling turned on the terms of use. The lesson is practical: before you deposit, read who owns the asset once it arrives. Terms that transfer ownership to the company turn a deposit into a loan, and a loan ranks behind secured claims in a bankruptcy.

What happened to Alex Mashinsky after the Celsius bankruptcy?

The US Department of Justice charged the former chief executive, Alex Mashinsky, with 7 counts of fraud, conspiracy and market manipulation. In December 2024 he pleaded guilty to 2 fraud counts and agreed to forfeit $48 million.

In May 2025 he was sentenced to 12 years in prison. The court record is the reliable source for what he did and what he admitted, and this page reports the outcome without adding claims beyond that record.

What does it mean to be a Celsius creditor in the bankruptcy?

A creditor is a person or company that the debtor owes money or assets. In Chapter 11, creditors submit claims, a court supervises the process, and a plan decides how the available value is shared. Unsecured creditors share what remains after secured claims, so their recovery depends on the size of the estate and on the plan.

A depositor who becomes a creditor gives up 2 things: control of the coins and the speed of access. The coins stay inside a legal process whose pace is set by the court. Customers who follow the court docket and the official notices get the dates and amounts first-hand, instead of through rumours.

Why is a crypto lender like Celsius different from a bank?

A bank account in many countries sits under deposit rules and a supervisor. A crypto lender account depends on the terms of the company and on the law of the place where it files for bankruptcy. A reader should therefore read the contract before reading the interest rate.

The difference shows in the Celsius case: customers who thought of a deposit found they were creditors. A rate of up to 6.2% on bitcoin paid for the risk of a loan to the company, and the risk was real.

Which warning signs preceded the Celsius withdrawal freeze?

3 public facts stand out. The rate offered was high relative to ordinary savings. The company lent customer coins and invested them, so returns depended on markets. The terms of use gave Celsius ownership of deposits. None of these proves a failure, and each justifies a question.

Ask where the coins are invested, who the borrowers are, and which assets back the company in a downturn. A lender that answers with figures and dates gives you evidence to test.

What 4 checks should a reader run on a Celsius-style crypto lender?

4 checks apply. Read the terms of use for the ownership of deposits. Ask for audited reserves and a list of the main borrowers. Ask what the company does if withdrawals rise at the same time as prices fall. Ask which regulator supervises the activity.

The EQOS Asia method page shows how such checks feed a structured score, and the contact page lets you bring a counterparty question from your own treasury.

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About the author

Stéphane Jambu

President, EQOS Forecast Asia

Stéphane Jambu leads EQOS Forecast Asia and works as a consultant in e-commerce, search visibility, and AI. LinkedIn profile