Crypto lender Celsius operated a riskier business than advertised and failed to report hundreds of millions in losses, all while CEO Alex Mashinsky cashed out more than $68 million, according to a court-ordered report into its bankruptcy.

The report also detailed staff fears about whether they were complying with the law, including comments from Harumi Urata-Thompson, who served as chief financial officer from February 2020 to November 2021, that "we are doing something possibly illegal."

Celsius's marketing told customers that it made low-risk and fully collateralized investments to secure the yields it offered, according to independent examiner. Yet when the lender filed for Chapter 11 bankruptcy protection last July, it reported a $1.2 billion hole in its balance sheet.

By June of 2021, at the height of the bull market, a third of Celsius’s institutional loan portfolio was wholly unsecured and more than half was under-collateralized, the bankruptcy examiner said. The firm also recognized $800 million in losses in 2021 from investments with Grayscale, KeyFi, Stakehound and Equities First Holdings. It did not report these losses to its customers when they were incurred, the report said.

(By Benjamin Robertson and Kari McMahon)