Crypto lender Celsius mulls possible restructuring amid financial woes

[uneng]

The token would exist to repay creditors, and would represent a claim against Celcius' assets.

Celsius is currently in Chapter 7 liquidation bankruptcy, the idea is that it would change to Chapter 11 bankruptcy and would resume operations.

That is trickery from Celsius.

Creditors don't want to be paid with this token. Creditors want another plan for Chapter 7, so this company can be finally liquidated, all the assets held sold and the profit given to creditors (in bitcoin, preferentially, or dollar) proportionally to their holdings on the platform.

There isn't a reason for Celsius to resume their operations, since it was proven it's not a legit business. What happened previously would happen again futurely, if they resumed operations.

There are presumably already hedge funds, and other entities buying up claims from former customers, this token would make the pricing of the debt more transparent.

I still don't understand what is the point of having a worthless token as middleman on this negotiation, besides it being sole trickery from Celsius.

Hedge funds and other entities pay in btc, and btc is transferred to creditors. No tokens are needed on the process.

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[bbc.reporter]

@o_e_l_e_o. They are following Bitfinex's tactic when it was hacked for much of their bitcoins in cold storage.

As you say, the difference here is that Bitfinex were still operating. As insane as I think it was for Bitfinex users to accept payment in a centralized shitcoin, at least Bitfinex had some kind of strategy to recoup their losses and pay back their users. Celsius have nothing except a scam coin built from the ashes of a scam exchange.

Celsius is thoroughly a ponzi. We cannot be quite certain if this was being done from the beginning, however, Celsius used the money from their customers to pump CEL tokens and customer withdrawals were funded by new deposits. This is a pyramid ponzi very much similar to those give us money and we double it in 3 months scam.



Dean Happen, coin deployment specialist at Celsius, noticed that customer funds were being used to fund CEL purchases. In January 2021, he said internally that his title at Celsius should be “Ponzi Consultant.” And last year, Tappen called Celsius’ practice of using customer assets to fund CEL purchases as “very Ponzi like.”

The examiner found that Celsius didn’t have enough liquidity to cover future withdrawals in the period leading up to its withdrawal pause, and that it had to rely on new customers to fund further claims. This would be typical of a Ponzi case, but the examiner didn’t explicitly state that it amounted to one.

Source https://blockworks.co/news/celsius-execs-joked-that-investors-thought-the-cel-token-was-going-to-the-moon

[Rikafip]

Celsius announced earlier today via Twitter that certain amount of users will be able to withdraw 94% of their assets, while court will decide about the rest 6%. Here is the list of those who should get (part) of their money out https://cases.stretto.com/public/x191/11749/PLEADINGS/1174901312380000000181.pdf. It seems like only those that had up to $7,575 and additional criteria (full list of criteria is in that link) are eligible for withdraw so I hope some of you that have money there meet those. Few people I know that have money stuck there unfortunately don't.


https://twitter.com/CelsiusNetwork/status/1620627975388696576

[uneng]

Celsius announced earlier today via Twitter that certain amount of users will be able to withdraw 94% of their assets, while court will decide about the rest 6%. Here is the list of those who should get (part) of their money out https://cases.stretto.com/public/x191/11749/PLEADINGS/1174901312380000000181.pdf. It seems like only those that had up to $7,575 and additional criteria (full list of criteria is in that link) are eligible for withdraw so I hope some of you that have money there meet those. Few people I know that have money stuck there unfortunately don't.


https://twitter.com/CelsiusNetwork/status/1620627975388696576

Additional criteria is to have the money in a "custody account', instead of an "earn account", what means these people who are going to receive their money back had their funds idle on platform, simply using it like a wallet, while the majority of users had their funds in earning mode for interest income.

The amount of money Celsius is going to pay back to custody accounts' owners is insignificant on the bigger picture.

[PrimeNumber7]

The token would exist to repay creditors, and would represent a claim against Celcius' assets.

Celsius is currently in Chapter 7 liquidation bankruptcy, the idea is that it would change to Chapter 11 bankruptcy and would resume operations.

That is trickery from Celsius.

Creditors don't want to be paid with this token. Creditors want another plan for Chapter 7, so this company can be finally liquidated, all the assets held sold and the profit given to creditors (in bitcoin, preferentially, or dollar) proportionally to their holdings on the platform.

The tokens allow creditors to trade their claim against Celsius in a transparent way via an open market. The tokens would eventually be redeemed either for cash in the event of a liquidation, or for equity in the event that Celsius emerges via Chapter 11.

There isn't a reason for Celsius to resume their operations, since it was proven it's not a legit business. What happened previously would happen again futurely, if they resumed operations.

This isn't something for creditors to decide, nor for you to decide. If management can show the bankruptcy court that it can operate on a profitable operational basis, the bankruptcy court will likely allow for the case to be converted into a Chapter 11 reorganization case. My understanding is that Celsius had a small number of one-time events that caused it to become insolvent. I also understand that it mispriced both interest on deposits, and interest charged on loans, although this was likely to prevent a run on the bank.

There are presumably already hedge funds, and other entities buying up claims from former customers, this token would make the pricing of the debt more transparent.

I still don't understand what is the point of having a worthless token as middleman on this negotiation, besides it being sole trickery from Celsius.

Hedge funds and other entities pay in btc, and btc is transferred to creditors. No tokens are needed on the process.

As it stands now, anyone buying up claims from creditors can do so without the creditors knowing with certainty what others are receiving for their claims. It may be hypothetically possible for someone to be willing to offer $0.25 on the dollar for claims, but will initially offer $0.20 on the dollar, and will make a subsequent offer of $0.22 before finally offering $0.25. An open market for tokens will allow creditors to have more information about how much others are receiving for claims.

[o_e_l_e_o]

The tokens allow creditors to trade their claim against Celsius in a transparent way via an open market.

This does not need to happen via an open market. Celsius are liquidated, and the court assigns whatever assets remain between all creditors. Celsius adding a centralized scam token to this process brings little benefit for their users.

If management can show the bankruptcy court that it can operate on a profitable operational basis, the bankruptcy court will likely allow for the case to be converted into a Chapter 11 reorganization case.

This is dependent on them convincing the courts that they have a viable operation to resume. And given that they were operating as a Ponzi for many months before declaring insolvency, that might be a difficult task

My understanding is that Celsius had a small number of one-time events that caused it to become insolvent.

Perhaps. But they also operated as a Ponzi for months while insolvent, lied to all their users, used users' funds to pump their shitcoin, all with Mashinsky making sure to cash out his own profits prior to the bankruptcy. They are rotten to the core.

[uneng]

My understanding is that Celsius had a small number of one-time events that caused it to become insolvent.

Perhaps. But they also operated as a Ponzi for months while insolvent, lied to all their users, used users' funds to pump their shitcoin, all with Mashinsky making sure to cash out his own profits prior to the bankruptcy. They are rotten to the core.

I really would like @PrimeNumber7 were right on this one, but it seems the roots of the issue are much deeper than a small number of one-time recent events.


Unfortunatelly the court didn't consider these tweets as evidence of misleading advertisement from Celsius and Mashinsky, which directly contradict those terms of them used by the judge to decide money from depositors belong to the company. Maybe there is still hope in the case NY Attorney General is moving against Mashinsky personally, although that is not the kind of expectation I nourish regards justice system anymore.

[o_e_l_e_o]

Unbelievable that people would ask him on Twitter, but not actually bother reading the Terms of Use. I pointed out several years ago that their Terms of Use quite clearly stated that you got absolutely nothing back in the event of something going wrong.

Hell, their Terms of Use are still live on their website:

You agree and acknowledge that you are exposed to the possibility that Celsius may become unable to repay its obligations to you in part or in full, in which case any Digital Assets in your Celsius Account that are not using the Custody Service may be at risk of partial or total loss.

You acknowledge that with respect to Digital Assets used by Celsius pursuant to this paragraph:

    You will not be able to exercise rights of ownership;
    Celsius may receive compensation in connection with lending or otherwise using Digital Assets in its business to which you have no claim or entitlement; and
    In the event that Celsius becomes bankrupt, enters liquidation or is otherwise unable to repay its obligations, any Eligible Digital Assets used in the Earn Service or as collateral under the Borrow Service may not be recoverable, and you may not have any legal remedies or rights in connection with Celsius’ obligations to you other than your rights as a creditor of Celsius under any applicable laws.

So, in summary, all your assets are at risk of partial or total loss, you have no rights of ownership, and your coins are not recoverable.

But who to believe!? Mandatory legal documents or a tweet saying "fUnDs ArE sAfU".

[bbc.reporter]

Celsius announced earlier today via Twitter that certain amount of users will be able to withdraw 94% of their assets, while court will decide about the rest 6%. Here is the list of those who should get (part) of their money out https://cases.stretto.com/public/x191/11749/PLEADINGS/1174901312380000000181.pdf. It seems like only those that had up to $7,575 and additional criteria (full list of criteria is in that link) are eligible for withdraw so I hope some of you that have money there meet those. Few people I know that have money stuck there unfortunately don't.


https://twitter.com/CelsiusNetwork/status/1620627975388696576

Additional criteria is to have the money in a "custody account', instead of an "earn account", what means these people who are going to receive their money back had their funds idle on platform, simply using it like a wallet, while the majority of users had their funds in earning mode for interest income.

The amount of money Celsius is going to pay back to custody accounts' owners is insignificant on the bigger picture.

Also, the size of those accounts that can withdraw are those that are only up to $7575. This and how much in total was stored in custody accounts implies that the money Celsius will be paying back is more insiginificant than insignificant. They also only need to pay 94% of this hehehehe.

How much does everyone speculate Celsius will pay out? I reckon less than $10 million. We can assume that being a ponzi scheme, Celsius does not have much of the money anymore. They are in offshore bank accounts, Swiss bank accounts, went to Tornado Cash, swapped in Defi and held in Monero.

[PrimeNumber7]

The tokens allow creditors to trade their claim against Celsius in a transparent way via an open market.

This does not need to happen via an open market. Celsius are liquidated, and the court assigns whatever assets remain between all creditors. Celsius adding a centralized scam token to this process brings little benefit for their users.

The benefit is that creditors would not have to wait for the bankruptcy process to play out. If someone needs money today, they can sell their claim by selling their tokens. It is already possible for creditors to sell their claims today, but the pricing is opaque and it is difficult for sellers to know what buyers are generally willing to pay for their claims. So this token would improve transparency.

If management can show the bankruptcy court that it can operate on a profitable operational basis, the bankruptcy court will likely allow for the case to be converted into a Chapter 11 reorganization case.

This is dependent on them convincing the courts that they have a viable operation to resume. And given that they were operating as a Ponzi for many months before declaring insolvency, that might be a difficult task

Celsius had mispriced interest rates for both deposits and loans. The likely reason for this was to prevent too many people from wanting to withdraw, so they could continue operations.

My understanding is that Celsius had a small number of one-time events that caused it to become insolvent.

Perhaps. But they also operated as a Ponzi for months while insolvent, lied to all their users, used users' funds to pump their shitcoin, all with Mashinsky making sure to cash out his own profits prior to the bankruptcy. They are rotten to the core.

Mashinsky would presumably not be running a new version of Celsius, nor would most of the high-level executives/management.

Celsius is essentially a bank, and there are many banks that have a long history of being able to operate profitably.

[Rikafip]

How much does everyone speculate Celsius will pay out? I reckon less than $10 million.

You were very close with your prediction as according to the article below, Celsius is supposed to pay out ~$11 million worth of crypto. So yeah, its a small fraction of money compared to the total amount owed.

There were just 15,680 customers, however, who held around $43.87 million in what’s known as “Pure Custody” the entire time. It is this latter group that will see 100% funds returned, as per the bankruptcy court judge.

“Pure custody” would include users Celsius’s Custody and Withold Accounts, which effectively acted as crypto wallets.

But it is only users who held their funds in “Pure Custody” the entire time that will get 100% of their capital back due to rules around “preferential transfers.”

Customers that transferred from Celsius’ interest-bearing services into “Pure Custody” after the firm’s many financial issues became apparent, a period which the filing determines as 90 days before the firm declared bankruptcy on July 13, are only set for a return of capital up to a value of $7,575.

The above condition is set to impact around $11 million of crypto, according to the filing

Celsius is essentially a bank, and there are many banks that have a long history of being able to operate profitably.

Question is, how interested people would be in Celsius if they offered interest rate on par with banks, or even slightly higher? Add on that the increased risk of losing your money compared to banks and my guess is not too many. The only reason why Celsius was so popular is due high interest rate that was only possible by operating as a ponzi scheme and doing other shady stuff.

[o_e_l_e_o]

It is already possible for creditors to sell their claims today, but the pricing is opaque and it is difficult for sellers to know what buyers are generally willing to pay for their claims. So this token would improve transparency.

If anyone at Celsius actually cared at all about the transparency of customers selling their claims, then they could equally as easily set up a marketplace to allow customers to sell their claims on the open market in a transparent way, all without the need for a centralized scam token. The only motivation behind this token is Celsius' greed.

You were very close with your prediction as according to the article below, Celsius is supposed to pay out ~$11 million worth of crypto.

$4.2 billion in assets, and they pay out $11 million. 0.26%. Wow. And what about all the other 99.7% of their assets and the millions of customers who were ineligible for this pay out?

[PrimeNumber7]

It is already possible for creditors to sell their claims today, but the pricing is opaque and it is difficult for sellers to know what buyers are generally willing to pay for their claims. So this token would improve transparency.

If anyone at Celsius actually cared at all about the transparency of customers selling their claims, then they could equally as easily set up a marketplace to allow customers to sell their claims on the open market in a transparent way, all without the need for a centralized scam token. The only motivation behind this token is Celsius' greed.

I am not sure why you believe the motivation is greed on the part of Celsius. To my knowledge, Celsius would not receive any proceeds from the sale of said tokens.

Celsius is essentially a bank, and there are many banks that have a long history of being able to operate profitably.

Question is, how interested people would be in Celsius if they offered interest rate on par with banks, or even slightly higher? Add on that the increased risk of losing your money compared to banks and my guess is not too many. The only reason why Celsius was so popular is due high interest rate that was only possible by operating as a ponzi scheme and doing other shady stuff.

Bitfinex allows their customers to lend their various coins to the platform with the purpose of facilitating margin trading. The current APR for short-term BTC loans is 0.035% per year.

In order for Celsius to convert to a Chapter 11 bankruptcy, management would need to convince the bankruptcy court that emerging from bankruptcy as a 'going concern' would produce better value to creditors than liquidating its assets.

[JayJuanGee]

It is already possible for creditors to sell their claims today, but the pricing is opaque and it is difficult for sellers to know what buyers are generally willing to pay for their claims. So this token would improve transparency.

If anyone at Celsius actually cared at all about the transparency of customers selling their claims, then they could equally as easily set up a marketplace to allow customers to sell their claims on the open market in a transparent way, all without the need for a centralized scam token. The only motivation behind this token is Celsius' greed.

I am not sure why you believe the motivation is greed on the part of Celsius. To my knowledge, Celsius would not receive any proceeds from the sale of said tokens.

There's pretty strong evidence already in the public sphere that Celsius engaged in high levels of fraudulent and criminal behaviors, even if criminal charges have not yet been brought, so I doubt that there is any reason to give them benefits of the doubt that they are acting with good business intentions, unless they can overwhelminingly show their good business intentions in regards to the token that they are proposing.

Celsius is essentially a bank, and there are many banks that have a long history of being able to operate profitably.

Question is, how interested people would be in Celsius if they offered interest rate on par with banks, or even slightly higher? Add on that the increased risk of losing your money compared to banks and my guess is not too many. The only reason why Celsius was so popular is due high interest rate that was only possible by operating as a ponzi scheme and doing other shady stuff.

Bitfinex allows their customers to lend their various coins to the platform with the purpose of facilitating margin trading. The current APR for short-term BTC loans is 0.035% per year.

Bitfinex is not involved in a bankruptcy proceeding, including they do not have a large amount of evidence showing that they had been engaging in fraudulent/criminal behaviors in recent times.

Speaking of Bitfinex, remember in about August 2016 when they got themselves in a bit of a pickle with a supposed hack, and many folks in the bitcoin community thought that they had either run off with the coins (worser case scenario) or that they would not be able to open back up due to lack of funds and lack of public confidence in them (and/or loss of confidence in bitcoin).  They created a token and engaged in all kinds of creative maneuverings that some considered to be "innovative" and other considered to be manipulative, including ways to more subtly steal user's funds, but they were down in August 2016, and they were back running about a month later, and paid back the at-issue haircut coins by April 2017... They are held up as an example of "one way of doing it," even though for sure they had more flexibilities in what they had done because they were not in bankruptcy proceedings and they were mostly not under any other kind of direct supervision or even in the grasp of supervision (such as criminal proceedings)..

In order for Celsius to convert to a Chapter 11 bankruptcy, management would need to convince the bankruptcy court that emerging from bankruptcy as a 'going concern' would produce better value to creditors than liquidating its assets.

I agree with you on this point, and there could be ways that a conversion from Chapter 7 to Chapter 11 would be better for creditors.. and there should be a decent amount on Celsius to employ evidence and a good plan - the token sounds fishy on it's surface, but there could be a way in which it might be presented as a viable option and a preferable route forward, though I have quite a few doubts that Celsius would be able to convince a judge of such.. but hey, never say never.. I surely don't know enough details to realize that there might be some pieces of information and argumentation that cause such token to be more legit than it appears to be.

[bbc.reporter]

How much does everyone speculate Celsius will pay out? I reckon less than $10 million.

You were very close with your prediction as according to the article below, Celsius is supposed to pay out ~$11 million worth of crypto. So yeah, its a small fraction of money compared to the total amount owed.

There were just 15,680 customers, however, who held around $43.87 million in what’s known as “Pure Custody” the entire time. It is this latter group that will see 100% funds returned, as per the bankruptcy court judge.

“Pure custody” would include users Celsius’s Custody and Withold Accounts, which effectively acted as crypto wallets.

But it is only users who held their funds in “Pure Custody” the entire time that will get 100% of their capital back due to rules around “preferential transfers.”

Customers that transferred from Celsius’ interest-bearing services into “Pure Custody” after the firm’s many financial issues became apparent, a period which the filing determines as 90 days before the firm declared bankruptcy on July 13, are only set for a return of capital up to a value of $7,575.

The above condition is set to impact around $11 million of crypto, according to the filing

Calling it a small fraction if compared to the total money they stole is downplaying it from what they really owe hehehe. It is not a fraction. It is a small drop of water in a wide ocean. According the court filings, Celsius owes $4.3 billion to customers.

$11 million is only .26% of $4.3 billion.

In any case, I am quite certain Swiss bankers are very happy accepting Alex Mashinsky's deposits.



Celsius ended November with $9 billion of liabilities, including more than $4.3 billion owed to customers, a court filing shows.

Source https://www.reuters.com/technology/new-york-sues-celsius-network-founder-mashinsky-alleges-fraud-2023-01-05/

[Rikafip]

Calling it a small fraction if compared to the total money they stole is downplaying it from what they really owe hehehe. It is not a fraction. It is a small drop of water in a wide ocean. According the court filings, Celsius owes $4.3 billion to customers.

$11 million is only .26% of $4.3 billion.

I don't see how I downplayed it by writing "a small fraction", but if we are nitpicking then I could say that you are downplaying the amount that will be paid out because one drop of water makes considerably less than 0.26% of any ocean, or even a bottle of water.  

[o_e_l_e_o]

To my knowledge, Celsius would not receive any proceeds from the sale of said tokens.

They don't need to. An example:

Celsius owes you 5 BTC. Instead, they claim that 5 BTC is equivalent to 5,000 CelsiusScamTokens, convert your 5 BTC debt to 5,000 CST, and credit your account with 5,000 CST. Celsius have therefore just profited by 5 BTC by erasing the debt they owe you, and instead paying you in a made up shitcoin they just created out of thin air. They don't care what you do with your CSTs. They don't care that the market for them will crash to almost nothing very quickly. They have erased the debt they owe you, and so they have made a profit. Bonus points for them in that by you accepting this settlement, you can no longer sue them or join a class action lawsuit against them.

And in terms of the argument that this was a series of unfortunate events for Celsius: https://tokenist.com/celsius-network-was-selling-its-users-btc-and-eth-to-prop-up-cel-token-report/

This is deliberately malicious, not to mention completely illegal. Used coins belonging to customers to prop up the CEL market so that the top execs could dump their bags before the whole thing collapsed.

[uneng]

$4.2 billion in assets, and they pay out $11 million. 0.26%. Wow. And what about all the other 99.7% of their assets and the millions of customers who were ineligible for this pay out?

The definitions of perfect crime were updated with success! 

[bbc.reporter]

Calling it a small fraction if compared to the total money they stole is downplaying it from what they really owe hehehe. It is not a fraction. It is a small drop of water in a wide ocean. According the court filings, Celsius owes $4.3 billion to customers.

$11 million is only .26% of $4.3 billion.

I don't see how I downplayed it by writing "a small fraction", but if we are nitpicking then I could say that you are downplaying the amount that will be paid out because one drop of water makes considerably less than 0.26% of any ocean, or even a bottle of water.  

Okay this is not a small drop on a wide ocean, however, this is still very very very very very much a small fraction of $4.3 billion and those hustlers in Celsius know that they are certainly going to get away with this.

I am not certain if these articles saying that Celsius has been insolvent from the beginning but appears the truth is coming out.



A new report by Jenner & Block attorney Shoba Pillay, the bankruptcy court-appointed Examiner of Celsius, claims that Celsius “on a stand-alone basis has been insolvent since inception.” The report, which centers around Celsius’s native token, argues that the crypto lender used CEL as the centerpiece of a scheme to enrich executives at customers’ cost.

Source https://tokenist.com/celsius-network-was-selling-its-users-btc-and-eth-to-prop-up-cel-token-report/


It was a ponzi scheme from the beginning.

[PrimeNumber7]

To my knowledge, Celsius would not receive any proceeds from the sale of said tokens.

They don't need to. An example:

Celsius owes you 5 BTC. Instead, they claim that 5 BTC is equivalent to 5,000 CelsiusScamTokens, convert your 5 BTC debt to 5,000 CST, and credit your account with 5,000 CST. Celsius have therefore just profited by 5 BTC by erasing the debt they owe you, and instead paying you in a made up shitcoin they just created out of thin air. They don't care what you do with your CSTs. They don't care that the market for them will crash to almost nothing very quickly. They have erased the debt they owe you, and so they have made a profit. Bonus points for them in that by you accepting this settlement, you can no longer sue them or join a class action lawsuit against them.

That is not how I read how the token would work.

From what I understand, if Celsius owed someone 5BTC, they might convert that to 5000 token units, and give you 5000 token units that represent your 5BTC claim. If you held the 5000 token units, you would have the same claim as you previously did, but if you were to sell the token units, you would be giving up your claim and would be transferring the claim to whoever buys the token units.

Someone who does nothing with their token units would be in the same position as someone as what would have happened if Celsius had never issued any tokens. Someone who buys the tokens would have the same rights as someone described in the previous sentence.

I understand that Celsius would be unable to exit bankruptcy without satisfying the token units. This would be done either via Chapter 7 in which Celsius would redeem each token unit at the same amount, or via Chapter 11 via redeeming the token units for equity in the new company. This is the same as if Celsius had not issued any token.