What happened
A lender that promised up to eighteen percent on deposits and told people to "unbank yourself", while quietly taking the risks that made those numbers possible.
| When | June 2022 |
| What kind of failure | Lending platform collapse |
| What it cost | About $4.7 billion owed to depositors |
The version the public saw
Celsius offered yields on ordinary crypto deposits that no bank could match, and framed it as a moral position: the returns banks kept for themselves were being handed back to ordinary people. Its CEO ran a weekly livestream. When asked directly whether deposits were safe, he said they were.
Underneath the same period
The yields were funded by lending customer deposits into DeFi protocols, by leveraged positions, and by buying the company's own CEL token to support its price. Celsius had large exposure to staked ETH that could not be withdrawn at the time, and to loans made to firms that were themselves collapsing.
The sequence
Terra takes the first bite
Celsius had funds in the Anchor protocol on Terra. When Terra collapsed in May 2022 that money went with it.
The staked ETH gap opens
Much of the remaining balance was in stETH, which represented staked ether that could not yet be redeemed. As holders rushed for the exit, stETH traded below ether, and Celsius could not close the gap.
Withdrawals frozen
On 12 June 2022 Celsius suspended all withdrawals, swaps and transfers, citing extreme market conditions. Customers never regained access.
Bankruptcy
Celsius filed for Chapter 11 in July 2022 with a hole of roughly $1.2 billion between assets and obligations.
The signals, before anybody knew the ending
None of these needed hindsight. Each one was public, or checkable, while the money was still there.
- A yield far above anything else available, with no clear source when you asked
- The company propping up its own token with customer funds
- Terms of service that transferred ownership of deposits to the company, in plain text
- A CEO answering questions about solvency personally rather than with an audit
The aftermath
Alex Mashinsky pleaded guilty to fraud charges and was sentenced to twelve years in May 2025. The Federal Trade Commission reached a $4.7 billion settlement with the company, suspended on its inability to pay. Distributions to creditors have returned a portion of what was owed.
The part that changes what you do
If you cannot name where a yield comes from, you are the yield. The Celsius terms of service said in writing that deposited coins became the company's property and depositors became unsecured creditors. Almost nobody read it, and that sentence decided the outcome for six hundred thousand accounts.
Common questions
What does unsecured creditor actually mean?
Was the Celsius yield ever real?
How do I judge a yield offer now?
Where to go next
Other cases like this one
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