Lesson 9.4 · 4 of 5 · Crypto without illusions
High crypto yields, staking and lending: Celsius, BlockFi, OneCoin
When a platform promises you 10-20% a year on crypto, the question is where the money comes from: risky lending, new coins it creates itself, or new customers’ money. Celsius offered 17% on some deposits and went bankrupt in July 2022. OneCoin did not even have a real blockchain.
Terms in this lesson
- Staking
- You lock up crypto to help a network run and get rewards for it.
- DeFi
- Blockchain apps that lend, swap and pay interest with no bank in the middle.
- Stablecoin
- A cryptocurrency tied to the value of a regular currency, usually the US dollar.
Where do staking and lending returns come from?
On Ethereum, validators earn ETH for proposing blocks and for their regular confirmations. Validators that go offline lose small amounts, and those that break the rules lose part of their locked ETH.
You hand your crypto to the firm in return for promised interest. It uses the coins to earn more. If its investments go wrong, you are just another creditor in the queue.
The interest comes in a token issued by the platform itself. Its value rests on trust in the firm and can collapse with it.
With staking through a platform, ethereum.org points out that the protocol pays the platform’s validators, not you directly, and that you need to trust the provider. The reward comes in ETH, so its value in pounds rises and falls with the price. With lending, the SEC described the mechanism exactly: customers handed their crypto to the firm, and the firm promised interest in return.
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Create a free accountCelsius and BlockFi: what happened to the high yields in 2022
| Celsius | BlockFi | |
|---|---|---|
| What it promised | 17% interest on some deposits | monthly interest on crypto lent to the firm |
| What regulators said | SEC (July 2023): false and misleading statements about the safety of customer assets | SEC (14 February 2022): $100m in penalties, together with 32 states, over unregistered interest accounts and a misleading statement about risk |
| The freeze | 12 June 2022: platform shut down | 11 November 2022, the day FTX filed: withdrawals halted |
| Bankruptcy | July 2022, with a $1.19bn hole in its balance sheet | 28 November 2022 |
| Worth knowing | founder Alex Mashinsky: 12 years in prison, 8 May 2025 | in July 2022 it had taken a $400m credit facility from FTX |
SEC releases of 14 February 2022 (BlockFi) and 13 July 2023 (Celsius); Reuters, 8 May 2025; Axios, 28 November 2022.
The two firms show two roads to the same end. Celsius fell when customers all rushed to withdraw at once. BlockFi went down with FTX, which had given it a credit line. In both cases, customers who had been collecting interest ended up as creditors in a bankruptcy.
OneCoin: a “cryptocurrency” with no blockchain
The real case
OneCoin, from 2014: the “cryptocurrency” that existed only on paper
OneCoin was sold as a cryptocurrency, in packages, through a multi-level marketing network: members earned commission for every new person they brought in. US prosecutors said the company claimed to have a private blockchain and to “mine” coins on its own servers, but it had no real blockchain and no coins were mined. The company set the price itself, raising it from €0.50 to €29.95 by January 2019. From the fourth quarter of 2014 to the third quarter of 2016, it reported sales of €3.353 billion. Its founder, Ruja Ignatova, was last seen in October 2017, according to the FBI, and has been on its Ten Most Wanted list since 30 June 2022 (as of 29 October 2026). Co-founder Karl Sebastian Greenwood was sentenced to 20 years in prison in September 2023.
BitConnect, which promised up to 40% a month from a “trading bot”, is covered in the lesson on Ponzi schemes. The mechanism was the same: newcomers’ money paid the “returns” of earlier members.
Warning signs with crypto yields
- High, fixed returns: the European supervisors urge consumers to be particularly wary of fast or high returns, especially those that look too good to be true.
- Paid in the house token: the interest comes in a coin issued by the platform. The SEC accused Celsius of manipulating the market for its own token, CEL.
- Commission for recruits: a real investment earns from what it does with the money, not from how many new people you sign up.
- A price with no market: if you cannot sell freely, anywhere, the number in your account is just a number.
- Missing from the registers: the firm is not on the FCA register or, in the EU, the ESMA register.
Lessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: ethereum.org, the page on staking; Regulation (EU) 2023/1114 (MiCA), recital 68; SEC releases of 14 February 2022 (BlockFi) and 13 July 2023 (Celsius); Reuters on Alex Mashinsky’s sentencing (8 May 2025); Axios on BlockFi’s bankruptcy (28 November 2022); US Department of Justice, charges against OneCoin’s leaders (8 March 2019); FBI, Ten Most Wanted entry for Ruja Ignatova; CoinDesk on Karl Sebastian Greenwood’s sentencing (13 September 2023); ESMA, EBA and EIOPA warning of 17 March 2022. The £10,000 and 60% example is illustrative.