Thread by @ShaharAbrams

When I met Alex @Mashinsky for the first time back in 2018, he explained to me a simple business model of holding user’s coins, making collateralized loans, and paying that yield back to depositors

It was straightforward, simple. It made sense

How the hell did we get here...?

For a while, it worked brilliantly. To the first users of the app, it felt like a new paradigm. "Earn Bitcoin on your Bitcoin"? It was a killer app. You just HAD to tell people about it

4 years later it's hard to believe I am reading the bankruptcy filing of this same company

The Ch 11 filing shed a lot of light on how this simple, straightforward business model went very wrong…

Mashinsky and Celsius got away from the business of just making good (collateralized) loans, earning honest yield, and paying what they could in-kind (or in CEL)

Over time, the reality began drifting farther and farther away from that simple business plan Alex laid out to me and so many others those days back in 2018

And here we are with (at least) a 30%+ hole in the balance sheet. In OUR money. What an epic fuck-up 🤦‍♂️

How did we get to this point? What caused the persistent drift?

I think that Defi had a lot to do with it

The filing highlights that 2020 (also the emergence of Defi) was the start of a number of problems in risk management - this is consistent with the Keyfi case as well

I think it’s likely the Celsius executives (all tech enthusiasts) saw the excitement of Defi and the accompanying high-yields, and thought they could play that same game with user funds

Alex is incredibly competitive, I think he simply saw Defi yields and got FOMO

And so Celsius' risk management starts to get increasingly reckless... meanwhile... on the AMAs @Mashinsky was poo-pooing Defi at every opportunity; telling users it wasn't safe - Celsius was better

Defi acts in it’s own interests, whereas Celsius acts in YOUR best interests...

I was one of the community members who was pushing Celsius to do more in Defi... but there is a way to play Defi "Delta Neutral" (ie w/o taking directional risk), many funds do it

I thought this was obvious, I never even conceived Celsius would take the kinds of risks it did.

We also had no idea the company was using DEPOSITOR assets to fund it's foray into Bitcoin mining/M&A... However you feel about the bullishness of BTC mining, this seems like an egregious overreach and an incredibly risky liability for the company and it's customers - all of us

I keep thinking about that slogan; “acting in your best interest” @Mashinsky probably repeated it multiple times a week btwn the AMAs, Twitter Spaces, etc.

I know it’s what drew me to the company personally, I believed it. All those proclamations hit really differently now

It’s just amazing to me how management fcked up such a good thing, such a simple thing. At some point, they stopped taking full collateral for their loans, they started dealing with riskier counterparties, they started getting more reckless in Defi...

and they started acting more and more like an unaccountable hedge fund, treating depositors like LPs and funding adventures into mining and M&A (see GK8)

They got away from what was supposed to be their core value - the industry's core value - transparency

In an attempt to end on a good note... it does seem like the company (via Ch11) is looking to find a recovery plan that hopefully WILL be in depositors' best interest. Many in the community are also doing great work- particularly @SimonDixonTwitt whose recovery plan I've endorsed

It seems obvious to me the current upper management cannot be allowed to continue, in fact I'll be surprised if they can ever work in this industry again (at least in any retail-facing biz). "Newco" feels like the only option. Forward is the only option 🙏