Celsius CEO resigns as bankrupt crypto lender works to survive

Celsius Network Chief Executive Alex Mashinsky, who founded the embattled crypto startup and served as pitchman for the sky-high yields it promised to its thousands of investors, is stepping down as the company works its way through bankruptcy.

The Hoboken, New Jersey-based company said it appointed Chief Financial Officer Chris Ferraro, a JPMorgan Chase veteran, to the role of chief restructuring officer and interim CEO.

Dania Maxwell/Bloomberg

The leadership change represents a major shift for the company, which filed for bankruptcy protection in July. Celsius was one of the most notable casualties in this year's crypto market meltdown, which started with the implosion of the TerraUSD algorithmic stablecoin in May and went on to engulf the crypto lender Voyager Digital Holdings, the hedge fund Three Arrows Capital and others across the industry while handing investors billions of dollars in losses.

Mashinsky, 56, who co-founded Celsius in 2017, said that he will continue "working to help the community unite behind a plan that will provide the best outcome for all creditors — which is what I have been doing since the company filed for bankruptcy," according to a statement from Cadwalader, Wickersham & Taft, the law firm representing Mashinsky.

The statement included an excerpt from Mashinsky's resignation letter, which said that he regrets that his role as CEO "has become an increasing distraction." 

Under Mashinsky's leadership, Celsius became mired in an increasing number of controversies. The company froze user withdrawals in June as it experienced liquidity issues, faced a lawsuit in July that called the firm a "Ponzi scheme" and disclosed a $1.19 billion deficit in its bankruptcy filing later that month. Along with Gemini Trust and Voyager, Celsius faced scrutiny earlier this year from the US Securities and Exchange Commission over whether products that pay interest on crypto deposits should be registered as securities.

The company eyed a comeback as Mashinsky laid out plans to pivot to crypto custody during an internal meeting earlier this month, according to a report from The New York Times. Following Tuesday's announcement, the price of the Celsius token fell 4% to $1.40, according to CoinMarketCap.

Mashinsky "doesn't have any credibility to push through any reorganization plans, given his track record," Mike Alfred, a private investor who co-founded BrightScope and who has been a notable critic of Celsius even before it filed for bankruptcy, said. "In order to get a reorganization plan approved, he probably has to walk away."

Mashinsky joins a growing list of crypto executives who have resigned or announced plans to step down during the market's downdraft. Jesse Powell, the often controversial co-founder of the crypto exchange Kraken, announced last week that he was giving up the role of CEO to become chairman. In August, the CEO of the crypto brokerage Genesis, Michael Moro, and Alameda Research co-CEO Sam Trabucco gave up their titles. Michael Saylor, the longtime CEO of MicroStrategy, stepped down after the software maker and bitcoin buyer reported more than $1 billion quarterly loss related to the cryptocurrency's massive price plunge.

Also Tuesday, Brett Harrison, president of the crypto exchange FTX US, announced plans of his own to step down.

— With assistance from Yueqi Yang.