August 12, 2022

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Before you advance degrees Regarding bankruptcy last month, the company sounded optimistic about its future. in BLOG POST 7 JUNE Titled “Damn the torpedoes, full speed ahead,” the crypto lending company targeted “sound actors” who were “spreading misinformation and confusion.” She assured her clients that she was “online 24/7” and said she was continuing to “process withdrawals without delay.”

Celsius — which offers bank-like services to crypto enthusiasts, including the chance to earn amazing interest rates by depositing digital assets and the ability to borrow using crypto as collateral — boasted that it had “one of the best risk management teams in the world.”

“We’ve made it through crypto downturns before (and this is our fourth!),” the company assured consumers. Centennial ready.

Five days later, Celsius paused all customer withdrawals — a move that essentially froze the assets of hundreds of thousands of users. A month later, Celsius filed for bankruptcy. During the bankruptcy proceedings, it became clear that the company did not offer the same protection as conventional banks. Alex Mashinsky, CEO of Celsius, wrote in a legal announcement that, since 2019, the company has “been clear” that it may have to pause withdrawals temporarily or permanently due to a variety of potential circumstances. When clients deposit their savings with Celsius, they “transfer” all rights and ownership “of their crypto-assets into a Celsius degree.”

According to a presentation given in court, Celsius now hopes to offer its customers a choice: accept cash payments equal to a fraction of their investment, or choose to “keep the cryptocurrency ‘long”’—that is, continue to hold their digital currency on Celsius books in the hope that they can In the end who refund their money.

This offer may not be enough to satisfy the depositors of Celsius, many of whom found themselves in dire straits after trusting the company. Dozens of clients detailed their plight in letters to the bankruptcy judge handling the Celsius case.

“My life savings were in percentage terms,” one depositor wrote last month. “I pray and hope every day that you will do everything in your power to properly return deposits to clients. I cannot tell my wife and children that our retirement and our dreams have been robbed of us. Life is old, we need updates and silence is not the answer.”

Encryption can be cumbersome origin. There are thousands of different digital currencies, and it is sometimes difficult to transfer them from one owner to another, thanks to fees and long processing times. It can also be difficult to buy or sell cryptocurrencies for traditional money. Unlike other assets, such as homes, it is difficult for cryptocurrency owners to borrow against their holdings. While the ownership of a crypto asset is recorded in what is known as a distributed ledger, this record does not correspond to a person but to a specific code stored on a computer. This means that it can be easy to loseespecially if the investor is not technologically advanced.

Companies like Celsius were created to solve these problems, making it easier for consumers to build their finances around cryptocurrencies. Celsius sought to portray itself as a consumer-friendly alternative to a greedy financial industry – the company used the slogan “Free yourself from the banks.” Mashinsky was a populist and often wore a T-shirt that read, “Banks are not your friends.” He was doing weekly live broadcasts with clients, whom the company called “its community”.

With the explosion of cryptocurrency value in recent years, financial regulators haven’t kept up. Although the percentage score does many of the things a bank does, such as making loans and paying interest to depositors, it Not registered with state regulatorsmeaning that clients did not have access to the same disclosures they would have had if they did business with a more traditional financial institution.

Celsius has seen rapid growth in tandem with soaring cryptocurrency prices, according to its bankruptcy filings. Mashinsky wrote in a lawsuit that this early success “was not without hiccups.” Celsius reinvests its clients’ deposits in an attempt to earn a profit, and “the company, too late, made poor decisions to spread the assets.” Mashinsky continued that the company tried to “quantify those commitments” starting in 2021. Then, in 2022, cryptocurrency prices fell. Clients began withdrawing their money, and Celsius found itself unable to unwind its investment fast enough to meet client demand. Eventually, the company paused its recalls and then declared bankruptcy.

Other legal actions paint an even darker picture. Multiple State Regulatory Bodies It alleged that Celsius, by allowing customers to open accounts, was offering illegal “unregistered security.” Vermont Department of Financial Regulation issued a Consumer alert He warned last month that “Celsius’ assets and investments may not be sufficient to cover its outstanding liabilities” and that “Celsius has deployed client assets in a variety of risky and illiquid investment, trading and lending activities.”

In a separate lawsuit against Celsius, KeyFi, the company that provided investment services to Celsius, alleges that Celsius was “operating a Ponzi scheme,” that it was manipulating the value of its holdings, and that it lacked appropriate risk controls. Subsequent CNBC Reports He claimed that Celsius had a risk management team of only three full-time employees, a number that a former Celsius employee described as “too small”. Celsius declined to comment on CNBC and did not respond to questions from Mother Jones.

in their messages To a bankruptcy judge, Celsius clients said they were initially drawn to the company because of its anti-Wall Street ethos. One wrote, “It felt like a safe consideration.” “Many of the offerings from Celsius such as: ‘Unbank yourself’ and ‘Banks are not your friends’ make sense when moving into the new world of digital cash systems.”

Some have stated that they find Celsius’ social media, such as the weekly livestream, particularly compelling. Another customer wrote: “This company has portrayed itself as a safe alternative to a bank that cares about its community.”

Celsius let down this community in the end. The messages show that a number of clients have suspended large portions of their savings with the company. Now, with percentage withdrawals on hold, those assets are in limbo. One letter reads “I am a Celsius customer and have just over $15,000 of deposits held in Celsius.” “$15,000 may not mean much to some people, but it is about 65% or my life savings.”

For some, the percentage issues did little to dampen their general enthusiasm for cryptocurrency. “I am a long-term HODLer,” says one letter, using a slang term for people who hold onto their cryptocurrency during market volatility and expect its value to increase over time. “If there were guarantees of a full refund of the funds in my accounts, I would choose HODL for the foreseeable future because this investment was a long-term process.”

As part of the bankruptcy process, Celsius hoped to “take care of her world community,” Mashinsky wrote to the court. But the company has many other creditors who are not customers and may have stronger claims to its assets, Bankruptcy experts told Reuters. Regardless, it can take years for bankruptcy proceedings to run their course. With their accounts frozen and no guarantee that the process will resolve in their favour, some Centennial clients are growing anxious.

One customer wrote: “Every Monday I receive a notification from my Celsius app about paying me interest, and I felt a sense of pride in growing the nest egg.” “The money is now held hostage by Celsius and this has damaged my family tremendously. Every day since June 13, 2022, I have been up and freaking out for part of the day. I look at my children and think about how I can invest the money that Celsius has taken from myself in improving their lives.”

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