Crypto lender Celsius mulls possible restructuring amid financial woes

[o_e_l_e_o]

I thought that by having an identified individual forward the business it would be a guarantee to investors, as he couldn't simply run away with everyone's money like it has happened in crypto world with the usual anonymous ponzi schemes so far.

There are plenty of scams in crypto with named individuals at the top who have managed to avoid or evade any punishment. A few that immediately spring to mind are the Quadriga exchange with Gerald Cotten who faked his death, Do Kwon of Terra Luna, and CSW of BSV. Being named does not mean being accountable, especially when you can use all the money you have stolen to pay great lawyers to figure out loopholes or escape mechanisms for you.

It was like he premeditated it since the beginning, especially when taking his 'terms and conditions' in consideration and how they were written to not give depositors any protection or right over their own funds.

I'm not sure it was entirely premeditated from before Celsius was launched, but the fact that these documents show Celsius has been insolvent for over three years and yet continued to offer promotions and interest rates they knew they couldn't pay out in order to encourage further deposits to finance their ongoing Ponzi scheme is very damning.

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[PrimeNumber7]

As noted above, the sales by Mashinsky may have amounted to insider trading

I don't see how they could be anything else. He not only used insider knowledge of when CEL would pump, but he owned and operated the company which was actively pumping CEL using depositors' coins.

I understand that Celsius gave incentives for their deposit holders to receive interest on their deposits in the form of CEL tokens versus the type of coin they had on deposit. I would think that Celsius would purchase CEL tokens on the open market in order to have sufficient CEL tokens to be able to credit their customers' accounts. So Celsius had a legitimate business reason to be buying CEL tokens (this is true even if the practice of paying interest in CEL is non-optimal). I can only speculate as to why Celsius was buying up all that CEL as described in the declaration referenced in an above post, however I think it is likely that Celsius' customers tried various means to try to get money out of their accounts around when Celsius halted withdrawals.

I would also note that, according to the sources I cited in an above post, that Mashinsky made many purchases and sales of CEL over many months. In public companies, it is possible for some employees/executives with access to insider information to have written trading plans to buy or sell stock in their company at specific amounts and intervals that are made ahead of the actual trades. It is possible that Mashinsky employed a similar strategy in his trading of CEL tokens. It is also possible that Mashinsky was comingling his CEL holdings with that of Celsius, which although would create a whole separate set of issues, but would not amount to insider trading.

As someone who may consider investing in a company similar to Celsius, the CEL token concept is something that would turn me off, and I think is a generally bad idea.

I am of the same opinion of any coin/token a centralized platform releases. CEL, BNB, FTX Token, KuCoin Token, etc. They all offer incentives like lower trading fees on that platform or more interest if you hold x amount, but the underlying purpose is singular - encourage users to leave their money in the hands of third parties. They should not be trusted.

Holding coin on a centralized exchange carries risks, and the person/entity considering to do this should be sure they are being compensated for these risks before deciding to hold their coin on an centralized platform. A trader who frequently trades on a centraized exchange might be compensated by their ability to ~instantly trade when they need their trade executed in fractions of a second. In the case of Celsius, the compensation was interest payments (even if in this specific case, deposit-holders are going to see net losses once the bankruptcy case is resolved), and in the case of CEL, the compensation is additional interest.

My issue with CEL tokens is that I understand it has no real utility. I suspect that Celsius purchased CEL on the open market, and their deposit holders would receive the CEL as interest, and presumably would sell the CEL they received. The price of CEL might increase if some deposit holders haven't (yet) received enough CEL to make it worth transferring to an exchange to sell it for a stablecoin or BTC, or if some deposit holders haven't sold the CEL for some other reason. Also, interest payments are made in batches, so Celsius would need to purchase CEL over time, which would likely cause the price to increase, and at the time interest is due to be paid, would transfer the CEL to their customers at the then-current market price.

What a joke, now Mashinsky wants to sell 23$ million in stablecoin assets from depositors to pay for the daily operations of the company. <>


https://www.coindesk.com/business/2022/09/16/crypto-lending-compmany-celsius-files-for-permission-to-sell-its-stablecoin-holdings/

It is normal for a company in Chapter 11 bankruptcy to continue paying employees. Celsius has filed for Chapter 11 bankruptcy, which means they are continuing operations. Companies in Chapter 11 bankruptcy will continue to pay employees for wages incurred after the bankruptcy filing.

The filing referenced in the article you cited can be found here. I don't see any reference to the proceeds being used to pay employee salaries or to fund its ongoing operational expenses. From what I can tell, Celsius is asking to convert its stablecoin holdings into fiat currency. This is something that will marginally the reduce the risk to Celsius' customers, as it will remove the risk that any of the stablecoins they are holding will implode.

[o_e_l_e_o]

I would think that Celsius would purchase CEL tokens on the open market in order to have sufficient CEL tokens to be able to credit their customers' accounts. So Celsius had a legitimate business reason to be buying CEL tokens (this is true even if the practice of paying interest in CEL is non-optimal).

This may well be true, but it is clear from the document shared that their purchasing of CEL went way beyond what was reasonable to maintain such business activity:

Celsius and its management engaged in the improper manipulation of the price of the CEL token, including by using the proceeds of investor deposits to acquire CEL tokens and increase its Net Position in CEL.

By increasing its Net Position in CEL, Celsius invested depositor assets in a long position in CEL that was inconsistent with its purported “market neutral” investment strategy.

In public companies, it is possible for some employees/executives with access to insider information to have written trading plans to buy or sell stock in their company at specific amounts and intervals that are made ahead of the actual trades. It is possible that Mashinsky employed a similar strategy in his trading of CEL tokens.

This may also be true, but at the same time, Brain Armstrong (for example) can't artificially pump the price of Coinbase shares just before his preset sell off date. Mashinsky, on the other hand, could absolutely pump the price of CEL by using depositor funds to buy it up, which we now know is exactly what he was doing.

[PrimeNumber7]

The statement that CEL was being “pumped” is an allegation made without specific evidence, nor with any comment/rebuttal by the party in question (Celsius/it’s ceo).

As I noted in my previous post, I would expect customers who believe Celsius to be insolvent to act in strange ways, and this may include increasing number of customers asking for interest payments to be made in CEL tokens. I am not sure if there were limitations on changes to this election or not.

According to the declaration referenced above, there was a large increase in the net CEL position after Celsius froze withdrawals. I believe it would be very strange for Celsius to do this if not for some outside influence, such as customers electing to receive their interest payments in CEL. It is possible that this was Celsius trying to make its balance sheet look better to potential investors prior to its bankruptcy filing, but I don’t know.

[o_e_l_e_o]

Honestly, this whole thing just keeps getting worse and worse.

https://www.cnbc.com/2022/09/23/celsius-has-a-hail-mary-bankruptcy-plan-turn-its-debt-into-a-new-cryptocurrency-.html

Excel. They were running their entire business using an Excel spreadsheet, which was being manually updated. Billions of dollars worth of assets, and all their acquisitions, sales, and loans being tracked by a person entering the figures by hand in to Excel. Unbelievable.

And now they plan to release a new token to compensate their users, and let the "market determine its value". A new scam built on top of a previous scam built upon a company ran by grade schoolers, apparently.

[PrimeNumber7]

The use of excel spreadsheets is very amateurish. I am not sure I believe this to be true. A single worksheet is limited to just over 1 million rows and the number of worksheets is limited to the available RAM on the computer accessing the workbook (the excel file). With 300,000 customers, I cant imagine excel being used exclusively for their business, and it is simply not reasonable for records for 300,000 customers to be manually updated regularly. I think it is far more likely that SQL (or some other database software) was used, and reports were output in excel format.

I actually like the idea of tokenizing their debt. Based on what I read in the article, customers who had BTC on deposit with Celsius, would receive an equal amount of "wrapped BTC" that can be exchanged on a DeFi platform. At the conclusion of the Celsius bankruptcy case, the "wrapped BTC" would be redeemed for actual BTC at a ratio that is dependent on the total assets, (and total valid claims) available (and made against) the bankruptcy estate. A similar procedure would be used for the other various altcoins that Celsius accepted for deposit.

There are multiple problems with the above. The biggest problem is that it would not treat all creditors equally. For example, those who have collateral being held by celsius, who have not yet repaid their loan would not be given these tokens (doing so would not be protecting the assets of the bankruptcy estate). A second problem is that claims are judged by the bankruptcy court, not by Celsius. If someone makes a claim that they are owed money by Celsius, the bankruptcy estate and/or other creditors can object to this claim if it is unsubstantiated.

[Rikafip]

So, Celsius CEO Alex Mashinsky decided to resign from his position and he continues to bullshit in his letter of resignation. Good riddance, but unfortunately its too little too late.

"I elected to resign my post as CEO of Celsius Network today. Nevertheless, I will continue to maintain my focus on working to help the community unite behind a plan that will provide the best outcome for all creditors – which is what I have been doing since the Company filed for bankruptcy,” Mr. Mashinsky said. He continued: “I believe we all will get more if Celsians stay united and help the UCC with the best recovery plan. I remain willing and available to continue to work with the Company and their advisors to achieve a successful reorganization.

[PrimeNumber7]

So, Celsius CEO Alex Mashinsky decided to resign from his position and he continues to bullshit in his letter of resignation. Good riddance, but unfortunately its too little too late.

It is possible that Mashinsky was being questioned about decisions he made and in lieu of answering the questions, he decided to resign. At least one regulator is saying that Celsius had multiple financial setbacks over the years. Celsius was a bank, and the business models for banks really do not allow for you to even be in a position to possibly have major setbacks.

I understand the operating losses, as they are likely the result of mispricing and/or a mismatch of deposit/lending volume. Having "one time" events is really more concerning to me.

[bbc.reporter]

There is an article that was published in a mainstream media outlet saying that Celsius executives have withdrawn at least $17 million of their money before freezing withdrawals for their customers. However, this is not the only problem. It appears Celsius has also made public a court document containing all their users' names, transaction times, and amounts of deposits and withdrawals. This is certainly a very serious breach of privacy.



Gizmodo has uploaded the latest Celsius court filing, which totals over 14,000 pages, to the Internet Archive for anyone who really wants to get into the nitty gritty of the bankruptcy case. It appears the filing is so large because it seems to have the names and recent transactions of every user on the platform.

Source https://gizmodo.com/celsius-execs-cashed-out-bitcoin-price-crypto-ponzi-1849623526

[ABCbits]

It appears Celsius has also made public a court document containing all their users' names, transaction times, and amounts of deposits and withdrawals. This is certainly a very serious breach of privacy.

And that document could be accessed at https://ia601401.us.archive.org/28/items/celsius/celsius.pdf. It has 277M size with total 14532 pages, which means you might have performance problem when opening that PDF file. I only spend few minute, but i saw coin transaction ranging to few cents to almost 1 million USD. I expect analytic company already parse this PDF as additional marketing data.

[Rikafip]

And that document could be accessed at https://ia601401.us.archive.org/28/items/celsius/celsius.pdf. It has 277M size with total 14532 pages, which means you might have performance problem when opening that PDF file. I only spend few minute, but i saw coin transaction ranging to few cents to almost 1 million USD. I expect analytic company already parse this PDF as additional marketing data.

That list of Celsius users is definitely legit. I checked it earlier today and I managed to find a couple of my friends that I know have money stuck in Celsius. Even though addresses have been redacted, it sucks big time to find yourself on that list and I definitely wouldn't like to be in their spot. And it proves once again dangers of doing KYCs all over the place as you never know who and how its going to be leaked.

[fillippone]

What an incredible shitshow.
I am translating a tweet from my fellow security researcher Riccardo Masutti:


Original source (in italian)

https://twitter.com/RiccardoMasutti/status/1578337874042580992

Hello everyone, another round another race!

All the names and surnames of Celsius users (or other platforms that were connected to Celsius as a third-party service and allowed lending) with the related transactions carried out and managed amounts have been leaked.

To search for a person and total amount

- Open the document here: https://cases.stretto.com/public/x191/11749/PLEADINGS/1174910062280000000017.pdf

- Go to page 92

- Click the first letter corresponding to the Name you want to search, a new document will open containing all the people who have that specific first letter in their name



To search for all transactions made by that person in the 90 days prior to bankruptcy and the relative addresses of the blockchains

- Open this document: https://cases.stretto.com/public/x191/11749/PLEADINGS/1174910062280000000005.pdf

- Turn to page 32

- Click the first letter corresponding to the Name you want to search, a new document will open containing all the people who have that specific first letter in their name



Essentially they have listed the exact dates and amounts of the cryptocurrencies that now anyone can simply search the public blockchain and trace the history of previous and subsequent transactions made by that person 😎



Enjoy 🥳🥳🥳

[stompix]

Is this really a "leak" or it was meant to be released like that?
https://blockworks.co/celsius-exposes-user-information-in-public-court-docs/

Seems like there was a motion to redact every personal details that might be a breath of privacy or put a debtor at risk, but seems it was declined and only private home addresses were redacted from those pages.

I am sure every IRS equivalent is just drooling over that list, nice start for them to find out some that haven't declared a penny in crypto earnings, I managed to find a friend's name on that list, he's a sitting duck, with that name which is quite unique even here in our country not to mention he has even his third name there I wouldn't want to be in his shoes right now.

[vapourminer]

that pdf with everyones name/entity reminds me of the mtgox leak.. doxxed everyone, basically.

shitshow is an understatement.

[pawanjain]

There is an article that was published in a mainstream media outlet saying that Celsius executives have withdrawn at least $17 million of their money before freezing withdrawals for their customers. However, this is not the only problem. It appears Celsius has also made public a court document containing all their users' names, transaction times, and amounts of deposits and withdrawals. This is certainly a very serious breach of privacy.



Gizmodo has uploaded the latest Celsius court filing, which totals over 14,000 pages, to the Internet Archive for anyone who really wants to get into the nitty gritty of the bankruptcy case. It appears the filing is so large because it seems to have the names and recent transactions of every user on the platform.

Source https://gizmodo.com/celsius-execs-cashed-out-bitcoin-price-crypto-ponzi-1849623526

Damn, is that true ?
Even I heard that Celsius made a court document public which had 14000 pages worth information about their users details which included transaction details as well as KYC details.
That is a huge security breach. I wondered why did Celsius did that but I didn't know that it has also withdrawn $17 million from their funds.
Seems like an exit scam.

[bbc.reporter]

that pdf with everyones name/entity reminds me of the mtgox leak.. doxxed everyone, basically.

shitshow is an understatement.

I have not entered the cryptospace when Mtgox had their own leaks and problems. However, I read some articles and I have heard about some people's bad experiences.

Also, agreed! It is a big understatement. It is a breach of privacy and those users will certainly be in a list somewhere for scammers and darknet criminals. The IRS and other government agencies might also be studying the list hehehe.

[PrimeNumber7]

There is an article that was published in a mainstream media outlet saying that Celsius executives have withdrawn at least $17 million of their money before freezing withdrawals for their customers. However, this is not the only problem. It appears Celsius has also made public a court document containing all their users' names, transaction times, and amounts of deposits and withdrawals. This is certainly a very serious breach of privacy.



Gizmodo has uploaded the latest Celsius court filing, which totals over 14,000 pages, to the Internet Archive for anyone who really wants to get into the nitty gritty of the bankruptcy case. It appears the filing is so large because it seems to have the names and recent transactions of every user on the platform.

Source https://gizmodo.com/celsius-execs-cashed-out-bitcoin-price-crypto-ponzi-1849623526

It ducks for those involved, but as noted above, the release of the names/transaction details was intentional and was required by the court. Celsius attempted to have the information redacted. One might argue this to be one additional reason to not use these types of crypto “banks”.

With regard to the withdrawals by executives, context is needed, and there is the potential for an explanation that is not scammy. With that being said, the coin withdrawn may be subjected to clawback by the bankruptcy court.

One night note that if the personal information was not released, it would be unlikely that anyone would know about the withdrawals by executives.

[ABCbits]

Is this really a "leak" or it was meant to be released like that?
https://blockworks.co/celsius-exposes-user-information-in-public-court-docs/

Whether it's leak or mandated by court, it's privacy disaster for all Celcius customer.

--snip--

With regard to the withdrawals by executives, context is needed, and there is the potential for an explanation that is not scammy.

--snip--

I agree, although currently exit scam/other scam behavior is most probable guess.

[bbc.reporter]

@ETFbitcoin. Agreed. It might not be something that was intended to be a leak, however, similar to a real leak, it is still a breach of privacy.

We would also never feel the negative effects of this breach because our names are not in the list. However, if they were, I am quite certain none of us would question that the information in this court filing will potentially put some people's lives in danger. I am not only talking about the names and details of the people in the list. I am implying that it has also become known by many financial institutions that those people deposited their money in a ponzi like Celsius. An example of a negative effect would be a drop in their credit rating and make them disqualified to get a mortgage or a loan. It might also appear during a background check if they apply for a job. They might be considered high risk.

[Pmalek]

Is this really a "leak" or it was meant to be released like that?

I initially thought it was a leak as well based on some wrong wordings I read in crypto-related news, but after talking with o_e_l_e_o about it in a different topic, I understood that the court requires it as part of Celsius' bankruptcy proceedings. Unfortunately, court documentation needs to be public. At least the addresses have been removed, which is a small positive in a sea of negative.   

Celsius is to be blamed for the bankruptcy.
Its customers are at fault for trusting them with their money.
And the court is responsible for making all data public and available for the whole world to see and use any way they want.