[2] In June 2022, the company gained notoriety when it indefinitely paused all transfers and withdrawals due to "extreme market conditions",[3] resulting in steep declines in the price of bitcoin and other cryptocurrencies.

[16] On July 7, 2022, former investment manager Jason Stone sued Celsius, alleging that the company ran a Ponzi scheme.

[17] Arkham Intelligence estimated a loss of $350 million due to improper trading protocol, which was included in Stone's lawsuit filings against Celsius.

[18] On August 23, Celsius sued Stone, alleging that he lost or stole tens of millions of US dollars' worth of cryptocurrency.

[25] Celsius was a major buyer of its own token, buying CEL interest it owed to customers on the open market.

Based on public data, Arkham Intelligence estimates that Mashinsky sold $44 million worth of CEL through exchanges.

[34] In September 2021, authorities in a number of US states said that Celsius's interest-bearing cryptocurrency accounts constitute an unregistered securities offering.

Prime Trust founder Scott Purcell suggested that re-hypothecating "would be destined for failure as any sharp market movement in either direction would be catastrophic to such a ridiculously leveraged business model".

[41] Celsius sued Prime Trust in August 2022, accusing the custodian of retaining $17 million worth of assets after the relationship ended.

[43] On June 7, in a blog post entitled "Damn the Torpedoes, Full Speed Ahead", Celsius addressed rumors that the company had lost client funds by making poor investments and that it was facing a liquidity crisis.

The blog post denied claims that Celsius sustained significant losses as a result of the collapse of Luna in the preceding month.

[44][45] On June 10, during his weekly "Ask Mashinsky Anything" session on YouTube, the CEO denied that Celsius was having problems with clients' access to their funds and he suggested that its critics were being paid by competitors.

[46][47][48] Around this time, Mashinsky was questioning skeptical commenters on Twitter, accusing them of spreading fear, uncertainty, and doubt about Celsius.

[49] On June 13, the company paused all customer withdrawals "in order to stabilize liquidity and operations", citing "extreme market conditions".

Celsius's own CEL token, which had been trading for almost $7 a year prior, was down by one-third after the withdrawal pause announcement, falling to $0.21.

Celsius appointed Chris Ferraro, its head of financial planning, analysis, and investor relations, to succeed Bolger.

[59] On its bankruptcy website, the company said that it intends to offer two options to customers, "... to recover either cash at a discount or remain 'long' crypto.

[64] On December 7, 2022, a U.S. bankruptcy judge ordered Celsius to return cryptocurrency worth $50 million to users of its custody accounts.

[65] In January 2023, the same judge ruled that about 600,000 customers had deposited cryptocurrency that, per the company's terms of use, belonged to Celsius, making the depositors into unsecured creditors.

[66] On July 13, 2023, the Federal Trade Commission announced a settlement that would ban Celsius Network from handling consumers' assets.

[68] At a court hearing on February 15, 2023, Celsius stated that it had selected NovaWulf Digital Management to provide guidance for its path out of bankruptcy.

[73][74] The company announced on January 31, 2024, that it had emerged from bankruptcy protection and that it had begun distribution of over $3 billion worth of cryptocurrency and fiat currency to its creditors.

"[52] The sudden end to customer withdrawals and subsequent bankruptcy led some commentators to highlight the lack of deposit insurance in the cryptocurrency sector.

Without deposit insurance, no entity is obligated to compensate Celsius's users or to prioritize them more highly than its investors should the company enter liquidation.