In late 2021 and early 2022, Celsius was flying as their CEO Alex Mashinsky hit the circuit spruiking Celsius' yield offering. While he was called out by multiple people including Tone Vays, Saifedean Ammous and even Peter Schiff, Celsius seemed to grow. We saw Celsius selling their yield product first hand at Bitcoin Miami 2022.

The offering was significantly higher interest on deposits than you could get in your bank. While it seemed great and lured a huge volume of investors it turned out that funds deposited were used for various other purposes not revealed to depositors which opened up Celsius to significant risk.

When the market price of cryptocurrency tanked in 2022 the risk management practices caused an unavoidable issue that Celsius didn't have enough cash on hand to meet client withdrawals and Celsius stopped all withdrawals. This was the beginning of the end and finished with bankruptcy.

Whenever someone is willing to pay you interest/yield you must (as a sensible investor) find out how that yield is generated. If you don't understand where it comes from and you invest you are opening yourself up to unacceptable risk. Moreover, you ARE the yield if the money you deposit is actually going to someone else.

You may have heard of Bernie Madoff who orchestrated the worlds biggest Ponzi scheme worth $64.8Billion USD. A Ponzi scheme works by paying investors withdrawing their funds from the deposits of new investors.

Bernie for example promised incredible outsized yield (returns), took client funds and stored them in an account. As his fame grew more and more money flowed in from people seeking yield but not understanding where it came from.

The financial crisis finally brought Madoff undone. The crisis caused investors to withdraw funds for their own needs all at the same time and Bernie couldn't pay as there was no new deposits coming in to honour all of the redemptions. He destroyed the investments of Universities, Family, and long time clients.

Unsurprisingly yield games and ponzis predate cryptocurrency. It was Banks that essentially invented hypothecation which is the practice of using mortgaged assets as collateral for their own borrowings.
So essentially using borrowers' houses as their own collateral for further loans.

Lehman Brothers, the failed Investment Bank that was the famous first domino of the 2008 GFC had collateralised so much debt that over 90% of their assets were collateralised. Their added risk sent them all the way to Bankruptcy when market prices exposed their significant risk. Institutions that chased the yield and lent to Lehman Brothers faced bankruptcy themselves but were in large part bailed out by the taxpayers.

In the crypto space bail outs are unlikely so know what you are getting into or be safe and keep your assets protected.

Stormrake custody is the low risk setting where you are not chasing yield but you are rewarded with protection of your capital. There are multiple reasons for why we offer our service this way:

1) The priority is security of funds and preserving capital
2) Wherever possible, client funds are held off exchange, in cold storage multi-sig wallets
3) We do not offer yield and therefore our clients do not face rehypothecation risk 
4) To allow us the ability to honour redemptions and withdrawals regardless of market cycles

On a final note, we also provide education to our clients on how to safely custody their own digital assets, bearing in mind they also have to take 100% of the risk for managing the ongoing safe keeping of their investments.

As a result no client funds have ever been lost due to stringent risk management and responsible service offerings.