Why Celsius, Voyager and BlockFi Collapsed

The crypto winter of 2022 exposed weaknesses in a fast-growing corner of finance: crypto lending. Three high-profile companies — Celsius, Voyager and BlockFi — went from market darlings to Chapter 11 debtors within months. The causes overlap (risky asset-management, opaque products, contagion from other failing crypto firms) — but the outcomes and legal consequences for their leaders were not identical. Below I explain, in plain language, why each firm failed, what happened to the people who ran them, and the concrete lessons for customers, regulators and builders.

Celsius — aggressive promises, risky balance sheet, criminal convictions

What went wrong: Celsius grew quickly by advertising high yields on customer “deposits” (its Earn program). It invested customer assets into riskier lending and trading activities and used its own CEL token as part of the business model. As crypto prices plunged in 2022 and liquidity dried up, Celsius froze withdrawals (June 2022) and filed for Chapter 11 in July 2022 — its balance sheet showed negative equity long before the collapse. The company’s business combined customer-like deposit accounts with opaque use of those assets, and its capital model couldn’t withstand a market shock. (ofi.la.gov)

What happened to management: Alexander (Alex) Mashinsky, Celsius’s founder and public face, was criminally prosecuted. He pleaded guilty to fraud charges relating to misleading statements about Celsius’s safety and the trading of its CEL token, and in May 2025 was sentenced to a lengthy prison term. Prosecutors argued he deceived customers about how their assets were handled and personally profited from token sales. (Department of Justice)

Bottom line: Celsius combined implausibly high retail yields, self-dealing via a proprietary token, and a fragile funding model — and when markets turned, the structure failed and led to criminal accountability for its founder. (nysb.uscourts.gov)

Voyager — a big loan, frozen withdrawals, and regulatory penalties

What went wrong: Voyager’s collapse was triggered in large part by exposure to a single counterparty: the hedge fund Three Arrows Capital (3AC). 3AC defaulted on a large loan to Voyager in mid-2022, and the company — already strained by falling crypto prices — suspended customer withdrawals and filed for bankruptcy in July 2022. The Voyager case is a classic example of concentration risk: a lender that depended heavily on a few big borrowers (and on an overheated market) can fail fast. (Reuters)

What happened to management: Stephen Ehrlich, Voyager’s CEO, did not receive a criminal prison sentence like Mashinsky, but regulators pursued civil and enforcement actions. The FTC and other agencies alleged that Voyager and its executives misled customers (for example implying FDIC-like safety) and made deceptive claims. In 2025 Voyager’s former CEO agreed to monetary payments and marketing/industry bans as part of regulatory settlements. (These were civil remedies: fines, disgorgement and injunctions/marketing bans — not jail time.) (CCH Business Insights)

Bottom line: Voyager’s failure underscores counterparty credit risk, inadequate disclosures to retail customers, and the regulatory consequences of misleading marketing even when the core business fractures because of other firms’ defaults. (Cleary Gottlieb)

BlockFi — FTX/Alameda exposure and regulatory settlements

What went wrong: BlockFi was damaged severely by its relationships with FTX/Alameda. It had loans and trapped assets connected to FTX, and when FTX collapsed in November 2022 those exposures created a liquidity crunch that led BlockFi to file for Chapter 11 later that month. Earlier, BlockFi had already been under regulatory scrutiny for offering interest-bearing accounts without registering them — a regulatory mismatch that later translated into big enforcement costs. (Reuters)

What happened to management: BlockFi’s senior leaders faced civil litigation and regulatory settlements (including a large multi-agency settlement earlier in 2022 regarding unregistered lending products). But unlike the Celsius founder, BlockFi’s executives were not sentenced to prison; instead BlockFi reached settlements, pursued asset recoveries through bankruptcy, and engaged in claims and class actions from customers. The fallout included fines, litigation and reputational damage — and a complicated wind-down of the business. (SEC)

Bottom line: BlockFi’s story is largely one of interconnected contagion — exposure to other failing crypto institutions (FTX/Alameda) and prior regulatory gaps around its products left it vulnerable when the broader system imploded.

What these collapses taught us — practical lessons

1. High retail yields often hide risk. If a yield looks unusually high for a “deposit”-style product, ask what the firm is doing with the assets — high returns usually require leverage, illiquidity or risk. Celsius is the poster child for this lesson. (ofi.la.gov)

2. Concentration risk is deadly. Loans to a single counterparty can sink a lender overnight (Voyager’s 3AC exposure; BlockFi’s FTX/Alameda links). Diversification matters. (Reuters)

3. Transparency and legal packaging matter. A product labeled as a “savings” or “bank-like” vehicle but structured as an unregistered investment invites regulatory action. Clear disclosures, custody separation, audited reserves and legal compliance aren’t optional if you hold other people’s assets. (SEC)

4. Regulation follows failure. The wave of bankruptcies prompted stricter scrutiny and enforcement: expect more oversight, clearer rules about custody and securities registration, and tougher marketing enforcement (FTC, SEC, CFTC). (Cleary Gottlieb)

5. Customer protections matter — custody, not promises. Retail users should prefer models where assets are segregated, audited, and recoverable (custody with regulated custodians; insured/registered products when available). Marketing language like “as safe as a bank” should be verified — banks have capital and insurance frameworks crypto firms often lacked. (CCH Business Insights)

Actionable advice for consumers and founders

• Consumers: Don’t treat crypto platforms like banks. Keep a mental checklist: who holds custody, is there insurance, where are assets stored, can you withdraw anytime, and is the product registered?

• Founders/operators: Build transparent business models: separate custody, limit concentration risk, register products when required, and avoid marketing that implies false safety. Strong governance (independent boards, audits, risk committees) reduces both business and legal risk.

• Policy-makers: The crisis showed gaps: clearer rules on custody, standardized disclosures for crypto lending, and robust supervision of consumer-facing crypto products would reduce the chance of similar collapses.

Final thought

The Celsius, Voyager and BlockFi episodes are not just stories of market losses — they are a mixture of poor risk management, aggressive retail marketing, counterparty contagion, and in some cases fraudulent conduct. The fallout taught an expensive lesson: innovation without robust governance and clear legal models is a fast track to systemic harm. For customers, the safest posture is skepticism; for builders, the only sustainable path is transparency and regulatory compliance.