The Chief Executive Officer of the bankrupt crypto lender, Celsius, Alex Mashinsky, has resigned. Mashinsky will be replaced by Chris Ferraro, now the interim CEO.
Alex Mashinsky resigns as Celsius CEO
Ferraro comes with extensive experience in the finance sector. Before taking over as the CEO of Celsius, he served for around 18 years at one of the leading firms on Wall Street, JPMorgan Chase & Co. Celsius has said that Ferraro will guide the lender in its restructuring efforts.
While announcing his resignation, Mashinsky said that his continued role as CEO of Celsius has been “an increasing distraction.” He also apologized to the Celsius community for their difficult financial circumstances.
Mashinsky’s decision to step down comes at a difficult time for the crypto firm, given that it is currently seeking protection from creditors. Celsius halted withdrawal services in June before filing for bankruptcy a month later.
Mashinsky addressed his resignation letter to the company’s board of directors, explaining that he was fully committed to supporting the company in coming up with a plan where deposits would be returned to customers.
Before filing for bankruptcy, Celsius had 1.7 million customers. These customers were affected by the company’s decision to freeze withdrawals and transfers in June. At the time, Celsius said that the decision was caused by “extreme market conditions.” Celsius also reported a $1.19 billion deficit on its balance sheet.
Crypto winter affects crypto lending
In May, a lot was happening in the crypto sector following the collapse of Terra LUNA. The collapse of the cryptocurrency caused ripple effects across the market, and crypto prices plunged. In June, Bitcoin dropped to 2020 lows of $17K, creating panic across the sector.
It was during this time that Celsius announced it was closing its doors. Several DeFi lending platforms exhibited signs of stress in the following months as the market failed to recover.
The 2020 crypto lending market is quite different from that of 2020. The growth of Celsius and other crypto lenders skyrocketed in 2020 and 2021 as the pandemic attracted depositors seeking to access the high-interest rates and loans that were processed more quickly than traditional banks.
Crypto lenders came under scrutiny following the sharp decline in crypto prices this year. Their business model in investing in risky assets that plunged in value is being attributed to their weak finances during the crypto winter.
In August, Celsius filed a lawsuit against a firmer investment manager. The crypto lender accused the former employee of losing and stealing tens of millions worth of assets before the lender filed for bankruptcy.
Before Celsius announced it was halting withdrawals and transfers in June, Mashinsky had denied rumors that the firm was under financial stress, adding that the rumors were just FUD. However, days later, the lender froze all services.
However, Voyager is not the only crypto firm that has filed for bankruptcy amid the crypto market turmoil of 2022. Three Arrows Capital and Voyager Digital also filed for bankruptcy. Voyager filed for bankruptcy after Three Arrows Capital defaulted on over $630 million. The FTX exchange has since won a bid to acquire Voyager assets. FTX will be acquiring the bankrupt exchange for $1.42 billion.
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