Alex Mashinsky likes to wear a T-shirt. The T-shirt is black and carries a simple slogan: “Banks are not your friends.

”He wears the shirt often, or at least he used to. There are lots of cheeky T-shirts worn by Mashinsky, the 56-year-old founder of Celsius Network. At the Bitcoin 2021 conference in Miami, for example, Mashinsky encouraged everyone to “party like a crypto whale” and swing by the Celsius booth to grab your “HODL T-shirt.

”That shirt has a sneaky triple meaning. First, there’s the word’s boozy typo origin story. Second there’s the joke that “HODL” means Hold On (to your crypto) for Dear Life.

The Celsius shirt meant that and something extra. It implies you should HODL your funds in Celsius, specifically. It’s a simple pitch: Why keep your crypto in a private wallet when you can park it with Celsius — nearly risk-free! – and sometimes earn over 18% yield?Mashinsky, oozing confidence, wore the black HODL T-shirt as he explained the basics in an August 2021 interview with the influencer known as CTO Larsson.

Mashinsky assured viewers that Celsius posed “much less risk” than banks, but still managed “to deliver high-single-digit or low-double-digit” returns. Read More: What Happens to Celsius Creditors if Crypto Prices Recover?How was that possible? How could Celsius have “much less risk” but provide eye-popping returns? It sounded too good to be true. Mashinsky explained that the differential in interest rates simply “shows how much these banks are stealing from you.

”How do they get those yields? That’s the question asked repeatedly by Steven McClurg, cofounder and chief investment officer of Valkyrie Investments. McClurg met with Mashinsky several times. “We would ask them really simple questions like, ‘Who are your counterparties?’” McClurg said.

He never received satisfactory answers. “He really wouldn’t ever give any details, and we tried to do due diligence on them,” but “so many [red] flags came up” and “he just wouldn’t answer anything directly,” said McClurg. When he had asked these same kinds of questions to well-known crypto exchanges Gemini and Coinbase (COIN), he received solid answers.

Not so with Mashinsky, which is one reason Valkyrie declined to work with Celsius. Flash forward to July 2022. Celsius, as reported, has now filed for Chapter 11 bankruptcy protection.

It acknowledged a $1. 2 billion hole in its balance sheet. It blocked users from withdrawing funds.

A separate lawsuit now accuses Celsius of “operating a Ponzi-scheme. ” And on and on and on. (This timeline is a good primer.

)Mashinsky is now the man at the center of a perilous moment in crypto history, an event my CoinDesk colleague Oliver Knight described as analogous to the Lehman Brothers collapse of 2008, “the failure that exacerbates a market crisis. ”So just who is Alex Mashinsky?The futuristMashinsky was born in Ukraine, raised in Israel and, in his telling of the story, he has been a serial inventor and entrepreneur for decades. Even a futurist, a la “Ironman” Tony Stark or Tesla (TSLA) CEO Elon Musk.

Voice over Internet Protocol? Mashinsky says he helped invent it, claiming in a 2018 video that with VoIP “we created a new technology, a new platform, completely decentralized, completely autonomous to the phone lines infrastructure. ”As the founder of early VoIP company Arbinet, maybe he helped. But the National Inventors Hall of Fame credits a woman named Dr.

Marian Croak as the inventor of VoIP. Mashinsky also claimed to have had the idea for Uber years before Uber, back in the era of Blackberry phones. “Uber copied everything we had.

We didn’t own a single car, we were [offering] cars on demand. We were the first app you could order a car on,” he once told Cointelegraph. “And yet we lost it all to Uber because they subsidized $14 billion worth of rides for millennials.

”Read More: Former Celsius Employee on the Crypto Lender’s Mismanagement and Alleged Token ManipulationAs for Mashinsky’s futurist chops? He burnished them by sharing, in that same interview, “My wife claims that I live in the future all by myself. And once in a while, society ends up coming to where I have been sitting on the road and waiting for them for a long time. But sometimes they go in a completely different direction.

”According to Mashinsky’s website, he has founded eight startups (Arbinet, Comgates, Elematics, Transitwireless, Governing Dynamics, GroundLink, Inseego and Celsius – and was generally also the chairman, CEO or managing partner), holds 50 patents, raised more than $1. 5 billion with over $3 billion in exits, “and now leads the Celsius team with over $25 [billion] in crypto assets. ”Presumably he’s too busy talking to lawyers to tweak the copy on his website (Mashinsky has not responded to any of CoinDesk’s requests for comment for the past week), but that “$25 billion” is almost certainly inaccurate or outdated, given the market’s price collapse.

And it might not be the only inaccuracy. Cory Klippsten, CEO of Swan Bitcoin, told CoinDesk he saw red flags when he investigated Mashinsky’s impressive-sounding bio and found that “he didnt have $3 billion in exits and he didnt have the most successful [initial public offering] of 2004. ”Celsius has now been running for five years.

The origin of the idea? A lesson for Mashinsky’s kids. “I have six children and I was shocked to find out that they did not know about ways to earn interest and ways to have your money work for you,” Mashinsky once told the news site Chipin. “So I decided to do something about it.

”Celsius’ journey is likely instructive for his kids, but perhaps not in the way that Mashinsky intended. Mashinsky shilled the lure of Celsius at conferences. He shilled it in ask-me-anything sessions (AMA) on YouTube.

He shilled it on Twitter. And he kept shilling it on those spunky black T-shirts. Even now, during bankruptcy proceedings, you can still scoop up the T-shirts as swag: black HODL T-shirts, “Banks are nor your friends” T-shirts, HODL golf shirts, HODL skateboards (which Mashinsky once brazenly hoisted on a video call after Celsius lost 35,000 ether (ETH), worth about $100 million at the time) and even “Unbank yourself” baby onesies – because you’re never too young to get risk-free high yields.

‘The Machine’Another of Mashinsky’s favorite T-shirts says “The Machine,” referring to his personal nickname and the lending machine of Celsius. It’s a magic contraption that spits out high-yield returns. Or at least it did until it didn’t.

It’s a machine that bitcoin (BTC) arch-nemesis Peter Schiff – to his credit, far earlier than most – attacked with a vengeance. In November 2021, back when the price of BTC was still above $50,000 and seemed on a glide path to the moon, Schiff questioned Mashinsky’s claims in a testy debate on Kitco News. “How do you generate yield on bitcoin?” Schiff asked.

“What do you do to generate income?”Mashinsky shook his head, telling Schiff that he’d be “happy to spend an hour with you, to educate you. ”Schiff persisted. “What are you doing to generate that [yield]? You must be taking tremendous risk to generate those returns.

”Mashinsky said that he was “not giving financial advice” and then repeated one of the oldest saws in the crypto space: “It’s an amazing opportunity for people to unbank themselves. ”Schiff saw the opportunity. He pounced.

“You know who also had an ‘amazing opportunity’? Bernie Madoff. ”Schiff, of course, was not alone in his skepticism. As early as 2019, lawyer Lawson Baker told CoinDesk that he saw Celsius’ lack of transparency about rehypothecation (the practice of borrowing against collateral posted by clients) as a red flag.

Or in 2020, also for CoinDesk, reporter Nate DiCamillo pointed out almost comical discrepancies between Mashinsky’s own statements (“Celsius does not do non-collateralized loans”) and Celsius’ own policy (Celsius did, in fact, make non-collateralized loans), under a prescient headline “What Crypto Lender Celsius Isn’t Telling Its Depositors. ”Read More: Celsius Network Could Stick Around After Bankruptcy, Restructuring Expert SaysOthers smelled something foul. Ron Hammond, director of government relations at industry lobbying group the Blockchain Association, recently told CoinDesk’s First Mover TV that Celsius “was getting a pretty bad rep” in the regulatory circles of Washington D.

C. People were concerned that “they’re not all they’re cracked up to be,” and “might be in violation of securities law,” Hammond said. Celsius applied to join the Blockchain Association but was rejected, according to Hammond.

Then there was the curious behavior of Mashinsky himself. “Anytime you ask him [Mashinsky] a direct question, he always kind of turns things around and talks about all the great things he’s done in the past, like inventing [VoIP],” said McClurg. “And he always goes on and on about all these patents he has.

” That, in a way, felt like “just craziness. ”The way McClurg sees it, there are “two different sides” to Mashinsky when he’s in public. On the one hand, “he has this edge around him where he acts like he’s very busy, and he only has five minutes for you, and then five minutes for somebody else.

” The other side? “It’s very charming. ” Yet, McClurg found that the charm had a dash of narcissism. When McClurg spoke on panels with Mashinsky, “Alex always made himself the center of attention.

”Soon there was evidence of more shenanigans. In June 2022, the pseudonymous crypto researcher Crypto Joe, along with his partner Riley_GMI, found through on-chain analysis that “it was clear they were leveraged-up,” meaning Celsius was using the funds from depositors in a riskier way than it had disclosed. Crypto Joe put it like this for a layperson.

“If you go to your bank and deposit $100, you expect to be able to withdraw your $100 at any point, right? You expect your bank to be managing that $100 responsibly. ”He continued: “If you go to your bank and the bank says, ‘Sorry, we invested it in low-cap s**tcoins, and you now no longer have $100,’ you’d be pretty upset, right?”Crypto Joe said that Celsius also required its clients “to send more capital to prevent them from being liquidated. ” (He cited this screenshot as evidence.

)A lawsuit now accuses Mashinsky of operating a Ponzi scheme. In that suit, KeyFi, Inc. claims that Celsius leveraged “customer deposits to manipulate crypto-asset markets,” that it “failed to institute basic accounting controls,” was “desperately seeking a potential investment that could earn them more than they owed to their depositors,” and that, ultimately, the firm “does not have the assets on hand to meet its withdrawal obligations” which shows – alleges the lawsuit – that the “defendants were, in fact, operating a Ponzi scheme.

”New best friendsThe next chapter for Mashinsky is very much in doubt, even among the bankruptcy experts. “There haven’t been many crypto-related Chapter 11s,” said Daniel Gwen, an associate at Ropes & Gray LLP who specializes in restructuring. Adding to the confusion, Gwen said that Celsius “marketed itself like a bank” despite its slogan that “Banks are not your friends.

” Yet, real banks in the U. S. , for the most part, are “excluded from the bankruptcy process” because they’re “governed by state law insolvency processes.

”But banks –at least the Wall Street rather than Main Street kind – could be part of the endgame. A few weeks ago it surfaced that Goldman Sachs (GS) was leading an investor group to buy distressed Celsius assets. It remains to be seen how that would play out in light of the subsequent filing in the U.

S. Bankruptcy Court for the Southern District of New York. But Gwen said that Goldman’s involvement remains a “theoretical possibility.

” In the end, for Mashinsky, maybe banks will be his very best friends. Oh, and all of that Celsius swag you can buy? You can also get a HODL Celsius tote bag, which is even “an exclusive signed edition from Alex Mashinsky. ” Maybe that’s the perfect gift.

Because ultimately, when all of this shakes out, it will likely be the customer who’s holding the bag. .