Man with moonshot ideas: The rocky journey of Celsius CEO Alex Mashinsky

For some 30 years, Alex Mashinsky dabbled in whatever was the hot technology of the day, promising revolutions in long-distance calling, airport travel and, most recently, crypto. He often left a trail of disgruntled friends, colleagues and investors.

His latest venture, Celsius Network, was billed as safe and subversive. It was a way for regular people to take advantage of the money-making potential of crypto and turn traditional banking upside down. Celsius filed for bankruptcy protection last month, and its customers worry they may never get their money back.

Public records and interviews with people who know Mashinsky paint a picture of a brash and confident serial entrepreneur with a constant flow of big ideas. Some of their ventures have been more successful than others, but they often had a common thread: Mashinsky often left them in tense circumstances.

After each dispute, Mashinsky found a way to bounce back and sometimes even get bigger. In less than five years, he nursed Celsius into one of the largest crypto lenders, with over $20 billion in assets at its peak. In its bankruptcy filing, Celsius said it grew too fast and was unprepared for turbulent market conditions.

TO READ The likes of Revolut, Fidelity and Binance are looking to capitalize on the crypto crack

While the collapse of one crypto lender may seem small, it could be a sign of more to come. Many crypto companies are interconnected and borrow and lend digital assets to each other. Since Celsius froze withdrawals in June, at least five other crypto firms have followed suit, highlighting the risk that an easing of speculative trading spills over into broader financial markets.

The terms of use on Celsius’ website say that in a bankruptcy, customers may not be able to recover the cryptocurrencies from their accounts or the collateral they provide for loans.

Neither Mashinsky, 56, nor a Celsius spokesman responded to requests for comment. In a statement issued after Celsius filed for bankruptcy protection, Mashinsky said the move was “the right decision for our community and company.”

“I’m sure that when we look back on Celsius’ history, we’ll see this as a defining moment, where acting with determination and confidence served the community and strengthened the company’s future,” he said.

Mashinsky was born in 1965 in Ukraine, under Soviet rule. His family lived in a shack and got permission to leave the country in the 1970s, he said in an interview with a podcast host this year.

“When I see little guys getting crushed by big guys, that’s what I’m fighting for,” he said in the interview.

Mashinsky later moved to Israel, where he finished his formal education after two semesters at Tel Aviv University, according to a statement he gave in 2018. (The statement was part of a lawsuit Mashinsky filed against a friend over a money dispute in state court in New York. The case is ongoing.)

He launched his first startup around 1995, when he was about 30 years old and had moved to the US. The company, Arbinet, created an exchange where phone companies could trade available bandwidth, according to Bob Barbiere, who worked on it with Mashinsky.

“You didn’t sit down with Alex and talk about the Yankees or the Giants or what was going on in basketball,” said Barbiere, who later used Mashinsky as a consultant to get financing for a music industry startup. “Alex was a business person through and through.”

TO READ Michael Lewis Teases New Wall Street Book: ‘You’ll Learn All About Crypto’

Mashinsky ran the company until 1999, after which venture capital investors took over.

Mashinsky later launched a proxy battle to get the company back, saying at the time that he was “uniquely positioned to take full advantage” of Arbinet’s technology.

Shortly thereafter, the company filed a lawsuit in New Jersey federal court accusing it of disclosing confidential information to institutional investors.

Mashinsky eventually won back a board seat. He denied the charge of disclosing confidential information, and he and Arbinet agreed to dismiss the case.

A representative for Innovate, the company that eventually absorbed Arbinet, did not respond to a request for comment.

Mashinsky started other companies after starting Arbinet, including a tech company that he sold, according to PitchBook, and another tech company that was backed by private equity firm Warburg Pincus. A Warburg Pincus spokeswoman said the firm exited its investment nearly 20 years ago.

Mashinsky was also involved with Transit Wireless from its inception. The company, which operates public Wi-Fi throughout the New York City subway system, did not respond to requests for comment.

After Arbinet, Mashinsky’s next big project was an on-demand travel booking platform that connected passengers with black cars and limousines. He said he got the idea after a driver had woken him up to pick him up at the airport.

The company, which he co-founded around 2004, was eventually called GroundLink. In 2011, Mashinsky helped secure a major cash infusion from private equity investors, who then installed new leadership.

Malcolm Elvey, a co-founder of GroundLink, said he left the company after a falling out with Mashinsky and was disappointed with how Mashinsky ran the company.

“My biggest regret is that we weren’t able to continue with our grand plan to create what would have been another Uber,” said Elvey, who is now based in Cape Town, South Africa.

Mashinsky soon returned to a family industry, becoming chief executive of telecommunications firm Novatel Wireless. Mike Alfred, a private investor specializing in crypto, said he met Mashinsky at a CEO networking club.

Alfred said that when Mashinsky was CEO of Novatel Wireless, he told Alfred that he had accumulated millions of dollars in call options, or bets, on another telecommunications company.

“My first impression was, ‘Here’s a guy who likes to take risks,'” Alfred said. “But you don’t typically see CEOs of publicly traded companies speculating on options to buy related publicly traded companies.”

Alfred later became an outspoken critic of Mashinsky and Celsius.

Novatel Wireless fired Mashinsky in 2015 after about 16 months at the post, according to a company press release, which did not provide details. Mashinsky said in the 2018 statement that he was fired because he refused to relocate from New York to the company’s headquarters in San Diego.

A spokeswoman for Inseego, a successor company, said she could not comment because the top executives who were there when Mashinsky left are no longer with the company.

Mashinsky then took on a series of consulting gigs, including one with Columbus Nova, according to his 2018 filing. Columbus Nova managed money through which Russian oligarch Viktor Vekselberg has invested in companies and real estate in North- american

In a business proposal, Mashinsky tried to get Columbus Nova to back a merger of three telematics companies, according to the statement by Mashinsky and Brandon Johnson, CEO of one of the companies. Telematics is a method of tracking vehicles using GPS technology and other information.

TO READ Crypto crash? It’s “just a mistake,” says BTCS boss Charles Allen

Johnson said she had a positive experience with Mashinsky and appreciated her enthusiasm and ability to dream big.

“All he wants to do is take a moonshot,” said Johnson, who heads the Modus Group. The proposed merger never happened.

Representatives for Columbus Nova, which now has a different name, and Vekselberg did not respond to requests for comment. Mashinsky did consulting work for Columbus Nova in 2016, according to his statement. The US Treasury Department sanctioned Vekselberg in April 2018.

In 2016, Mashinsky was hired as CEO of RTX Routetrader, a London-based fintech company in the telecommunications industry. “Another Billion Dollar Fintech Unicorn,” he tweeted. After six months, Mashinsky was out after a dispute with management, according to his 2018 statement.

RTX Routetrader did not respond to requests for comment.

Mashinsky launched Celsius in 2017 with two partners. He spoke of it in great terms. “I have 6 children at home and I think every day what kind of world we are leaving our children in,” said a post on his Twitter account in 2019. “Creating a #decentralized financial platform for everyone on the planet is my mission.”

Celsius had the same basic model as a consumer bank: make deposits, make loans, although it paid much more on deposits than a federally regulated bank. Mashinsky became a regular at crypto conferences, wearing a T-shirt that read, “Banks are not your friend.” He labeled any skepticism about the company as FUD, tech slang for fear, uncertainty and doubt.

On June 11, Mashinsky responded on Twitter to someone who said they had heard that Celsius’ accounts had been blocked.

“…do you know even one person who has trouble withdrawing from Celsius?” Mashinsky wrote. “Why spread FUD and misinformation.”

The next day, Celsius said it was pausing all customer withdrawals, citing extreme market conditions.

This article was first published by The Wall Street Journal.


Source link

You May Also Like

About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!