Aussie man loses $116,000 from Celsius crypto exchange that goes bankrupt

A Melbourne man has issued a warning after losing $116,000 due to crypto platform Celsius filing for bankruptcy.

IT worker Paul Winnell had a crypto portfolio worth $700,000 at its peak, and a large part of it sat with the Celsius exchange.

The value of his tokens invested in Celsius had fallen to US$72,500 ($116,000) when the company collapsed in July last year.

It has now been seven months since Celsius went bankrupt, but creditors like Winnell are still no closer to knowing if they will get a cent back.

He said he fell for a “Ponzi scheme” as more information has emerged from the court-appointed examiner who forensically reviewed the accounts of Celsius, including that the company had never transferred any profits.

“I’ve written it (the missing money) off, in my mind it’s gone,” Winnell, 51, said.

“If something comes back, that’s a nice bonus.”

The Celsius crash has left a trail of destruction, with more than 100,000 creditors owed money.

Celsius owes its customers US$4.7 billion, according to the Chapter 11 bankruptcy filing.

Each customer, like Winnell, is essentially an unsecured creditor to the company because money they put into the platform is considered a loan.

The firm’s CEO Alex Mashinsky has faced criticism for outright “lying” to customers and smearing the company in a targeted media campaign that turned out to be false.

New York State Supreme Court documents, which are suing Mashinsky for civil fraud, say the CEO “engaged in a scheme to defraud hundreds of thousands of investors … using false and misleading representations to induce them to deposit billions of dollars in digital assets with his cryptocurrency lending company”.

A former employee claimed that Celsius had never been solvent because they would invest customer funds in risky ventures.

Whenever a customer requested their money back, the company would attempt to purchase assets to raise the necessary funds.

They often had to buy assets on the open market at a premium, leading to more financial losses.

“I definitely feel burned,” Winnell said.

He said the amount of money he lost “didn’t ruin his life”, but added that his partner was “very upset” when he learned how much money the couple were unlikely to ever get back.

“It hasn’t ruined my retirement,” he insisted.

“There were people who put in a lot more money [in] than I did, it’s shocking, it really is. I hope we see something back.”

Winnell said he first came across the concept of cryptocurrency in 2016 and then invested. When the market rallied in 2017, he made $50,000 in profit.

“It piqued my interest in crypto,” he said. “I started to invest a little more in it.”

It was here that he came across Celsius and invested a large part of his fortune in the stock exchange, as well as 25 other investments.

“I invested about $60,000 (in crypto), which grew to well over $700,000 for me (at the peak),” Winnell added.

“I considered getting out for $550,000 and stupidly didn’t.”

Five months after Celsius collapsed, another major exchange called FTX also went bankrupt, throwing the crypto industry into disarray.