Cryptocurrency exchange Celsius is in bankruptcy, destroying its customers

Cryptocurrency exchange Celsius is in bankruptcy, destroying its customers

An Irish man on the verge of losing his farm, an American with suicidal thoughts, an 84-year-old widow who has lost all her savings: Cryptocurrency investment platform Celsius clients are desperate. Since the company filed for bankruptcy in mid-July, hundreds of messages from former users have arrived in court filled with anger, shame, and oftentimes remorse.

“I knew there were risks,” said a client, for example, who did not sign his testimony. “It seemed worth it.” Celsius has been one of the most important players in the sector, lending money and repaying deposits, playing on bank grounds without offering the same guarantees. The platform offered interest rates of over 18% for savers, but 0.1% for borrowers. It had 1.7 million customers in June.

Celsius owes customers $4.7 billion

But in the face of the cryptocurrency’s decline (Bitcoin has lost more than 60% since November), many companies have frozen withdrawals and/or filed for US bankruptcy. However, Celsius and its president, Alex Mashinsky, confirmed that the platform was a safe place to deposit their cryptocurrencies. It now owes $4.7 billion to its clients.

Their letters, accessible from the court’s public database, often tell of dire consequences, whether the loss amounts to hundreds or millions of dollars. They come from all over the world, from inexperienced crypto enthusiasts to evangelists of these new assets. Almost all of them agree on one point: their trust has been betrayed.

betrayal of trust

“From the hard-working single mom from Texas who struggles to pay her bills, to the school teacher in India who put her hard-earned money on a C: I think I speak for everyone when I say I feel betrayed, ashamed, depressed, and upset,” one client wrote EL. “Alex Mashinsky completely lied to me,” one said, describing himself as a “loyal, loyal customer since 2019.” He added, “Alex said Celsius is safer than banks.”

Back on June 7, Celsius boasted “having one of the best risk management teams in the world”. “We’ve had other crypto dips before (and this is our fourth drop!). The company said C ready. It claimed it had reserves to pay its commitments. Withdrawals were operating normally. But everything changed on June 12, when it announced Freezing.

Without it, she explains then, withdrawals would have “accelerated”, allowing “some customers, who are the first to act, to make up completely, leaving others behind to wait.” It promised to restructure to “maximize value for all stakeholders”. Then some customers receive a letter from the company.

Stress, loss of sleep and suicidal thoughts

“When I finished reading the email, I fell to the floor with my head in my hands, trying to hold back my tears,” said a man with assets stored in Celsius. Clients who say they have taken a bigger hit, including an individual who allegedly invested $525,000 that he borrowed from the government, say they have contemplated suicide. Others speak of stress, loss of sleep, and their deep shame about risking their savings or setting aside money to pay for their children’s college.

As a private company, in an unregulated sector, Celsius had few obligations to fulfill. “The majority of these companies offered loans without collateral or with inadequate collateral,” says Anthony Trenchev, co-founder of Nexo, another crypto platform he says has escaped stricter lending policy and prudent risk management. Victims hope that the court dealing with the bankruptcy process will help them get at least some of their money back. It may take years.

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