Crypto lender Celsius mulls possible restructuring amid financial woes

[bbc.reporter]

News update.

It appears it was not only Celsius' involvement with Luna and UST that caused the cryptolender's bankruptcy. Their CEO has made himself the head of their cryptocoin trading strategy. I reckon that we should look around the cryptospace and know which other CEOs or company executives are doing something similar hehehhe.



Alex Mashinsky took control of Celsius trading strategy months before bankruptcy

In January, Celsius Network boss Alex Mashinsky gathered his investment team to tell it he would be taking control of the crypto lender’s trading strategy ahead of an upcoming US Federal Reserve meeting.

Prices of popular cryptocurrencies such as bitcoin and ether had fallen from their all-time highs and the former telecoms entrepreneur said Celsius needed to protect itself from further declines. A hawkish outcome, he was convinced, could crash crypto prices.

In the days before the Fed met, Mashinsky personally directed individual trades and overruled executives with decades of finance experience, according to multiple people familiar with the matter.

In one case, Mashinsky ordered the sale of hundreds of millions of dollars’ worth of bitcoin, refusing to wait to double check Celsius’s often unreliable information on its own holdings. Celsius — which at the time held $22bn of customer crypto assets — bought the bitcoin back a day later at a loss.

Source https://www.ft.com/content/43d4fb5d-72a1-468c-aac8-9e11c4693f4e

[stompix]

How the mighty have fallen, but they still can't get their shit together:

Back in 2022:


Now:


They are advertising how much money they've paid back and how much they have recovered. What's next, a shinny bar that says we've lost only 75% of our customer's funds?

Btw, here is the magical plan:
https://cases.stretto.com/public/x191/11749/CORRESPONDENCE/1174908162250000000001.pdf
We have some sny numbers and letters, let's make it work somehow.

[Rikafip]

It appears it was not only Celsius' involvement with Luna and UST that caused the cryptolender's bankruptcy. Their CEO has made himself the head of their cryptocoin trading strategy. I reckon that we should look around the cryptospace and know which other CEOs or company executives are doing something similar hehehhe.

And yet people still think that those at the top know what they are doing while in reality they are not better than many of us noobs that are buying high and selling low. 

They are advertising how much money they've paid back and how much they have recovered. What's next, a shinny bar that says we've lost only 75% of our customer's funds?

Is that the money paid out to small investors, or only to major ones? I know couple of people that have decent amount of money in Celsius and I don't remember anyone saying that they get anything back yet so I guess its the latter.

[bbc.reporter]

It appears it was not only Celsius' involvement with Luna and UST that caused the cryptolender's bankruptcy. Their CEO has made himself the head of their cryptocoin trading strategy. I reckon that we should look around the cryptospace and know which other CEOs or company executives are doing something similar hehehhe.

And yet people still think that those at the top know what they are doing while in reality they are not better than many of us noobs that are buying high and selling low. 

I very much agree! 3 Arrows Capital was the most recent example of this that showed that some experienced crypto hedge fund managers are also just gambling on volatile market moves with unsustainably high leverage hehehe. Everyone thought Su Zhu's posts in social media was to trick his followers to buy if he was selling or sell if he was buying, however, what he was posting was the whole truth heehehe.

[PrimeNumber7]

Source https://www.ft.com/content/43d4fb5d-72a1-468c-aac8-9e11c4693f4e

Here is an archive of the article that is not subject to a paywall.

Neither Celsius CEO Mashinsky, nor Celsius commented on the article (as of when the archive was pulled), but if the article was accurate, Celsius was speculating with customer money on its own account. I don't know how reliable the reporter is, however, if this is true, Celsius was being very reckless, and I would speculate that the reason for the massive difference between customer deposits and Celsius assets is due to trading losses shortly before Celsius halted withdrawals.

I will reserve judgment until more credible information comes out, but in the interim, I would not let my money anywhere near the people involved.

[uneng]

Source https://www.ft.com/content/43d4fb5d-72a1-468c-aac8-9e11c4693f4e

Here is an archive of the article that is not subject to a paywall.

Neither Celsius CEO Mashinsky, nor Celsius commented on the article (as of when the archive was pulled), but if the article was accurate, Celsius was speculating with customer money on its own account. I don't know how reliable the reporter is, however, if this is true, Celsius was being very reckless, and I would speculate that the reason for the massive difference between customer deposits and Celsius assets is due to trading losses shortly before Celsius halted withdrawals.

I will reserve judgment until more credible information comes out, but in the interim, I would not let my money anywhere near the people involved.

The guy is a megalomaniac who thought he was untouchable at the top of the world. The lack of responsability and empathy for customers' funds must be explained by psychiatry. The way he portrays himself on his twitter account with a picture of himself carved out on a roman bust, making reference to the emperors of ancient times, gives a hint of his delusional, vain and selfish characteristics.

It shouldn't be risky or hard to lend money and pay dividends to lenders proportionally to the extra % paid back by borrowers... He completely screwed up a viable business model.

Won't his patrimony be seized and used to pay Celsius' creditors?

[Rikafip]

I very much agree! 3 Arrows Capital was the most recent example of this that showed that some experienced crypto hedge fund managers are also just gambling on volatile market moves with unsustainably high

It's not so hard to be a successful trader (or at least think that) during bear market, but once we enter bear market its completely different story. I rememebr back in 2017 I thought I am pro just because every shitcoin I bought was pumping but then shit hit the fan and I realized how clueless I was.

Neither Celsius CEO Mashinsky, nor Celsius commented on the article (as of when the archive was pulled), but if the article was accurate, Celsius was speculating with customer money on its own account. I don't know how reliable the reporter is, however, if this is true, Celsius was being very reckless, and I would speculate that the reason for the massive difference between customer deposits and Celsius assets is due to trading losses shortly before Celsius halted withdrawals.

Even if they say its not true, no one will believe them. Just remember that few hours before Celsius stopped withdraws, Mashinsky tweeted that rumors of Celsius having issues is FUD and people shouldn't worry while he obviously knew what's going to happen.

The lack of responsability and empathy for customers' funds must be explained by psychiatry. The way he portrays himself on his twitter account with a picture of himself carved out on a roman bust, making reference to the emperors of ancient times, gives a hint of his delusional, vain and selfish characteristics.

You just described majority of people that are behind these big crypto platforms/projects but more often than not they got served a slice of humble pie, like it happened with Do Kwon.

[PrimeNumber7]

It shouldn't be risky or hard to lend money and pay dividends to lenders proportionally to the extra % paid back by borrowers... He completely screwed up a viable business model.

The problem is that when a bank lends out money, it is not guaranteed that everyone will repay their loan in full. When that doesn't happen, the bank can have losses.

Neither Celsius CEO Mashinsky, nor Celsius commented on the article (as of when the archive was pulled), but if the article was accurate, Celsius was speculating with customer money on its own account. I don't know how reliable the reporter is, however, if this is true, Celsius was being very reckless, and I would speculate that the reason for the massive difference between customer deposits and Celsius assets is due to trading losses shortly before Celsius halted withdrawals.

Even if they say its not true, no one will believe them. Just remember that few hours before Celsius stopped withdraws, Mashinsky tweeted that rumors of Celsius having issues is FUD and people shouldn't worry while he obviously knew what's going to happen.

I wouldn't necessarily disbelieve what Celsius says be default, and there may be a reasonable explanation regarding the trading losses. For example, the trades could have been hedging positions, and the trading losses were offset by gains elsewhere on a 1-1 basis. Based on the article, this doesn't appear to be the case, and it appears the trades were speculative in nature.

[uneng]

It shouldn't be risky or hard to lend money and pay dividends to lenders proportionally to the extra % paid back by borrowers... He completely screwed up a viable business model.

The problem is that when a bank lends out money, it is not guaranteed that everyone will repay their loan in full. When that doesn't happen, the bank can have losses.

Here in my country banks don't lend money when the borrower can't put any collaterals on the table. The negotiations are very tied to not let any gaps which may cause losses for the banks. A debtor doesn't have his name cleaned and can't do any other business until he finally pay his currently debts. Theoretically, crypto lending also involves collateral, and in case the person doesn't pay the loan back, it's possible for the company to go after the debtor, since lending platforms enforce KYC.

When a bank crashes and go bankrupt it must be due to bad management. In this case the company Celsius was gambling with investors' funds doing daily trading.

[goldrushed2]

These companies are a joke. Not backed by real professionals. How can you lose money if you sell at good prices and then be patient to buy. Moon boys celsius.

[uneng]

Third day hearing at the court: Celsius proposes returning money back to customers who had their funds at Custody and Withhold accounts (not Earn and Borrow programs). It must cover a slight percentage of total customers, while the majority who was there obviously to earn interest or borrow money is ignored.

The reason behind the proposal might be this one:


Mashinsky doesn't give one without taking two...

[o_e_l_e_o]

So, and correct me if I'm wrong here as I've not been keeping up to date with this case, does that not imply Celsius are not only planning to just keep the contents of all earn accounts, but are also planning to try use the 90-day clawback rule to try to recover any withdrawals from earn accounts in the 90 days prior to them filing for bankruptcy? So even if you moved your funds from an earn account to a custody account, if you did it within the 90 day limit then those funds will be forfeited too?

[uneng]

So, and correct me if I'm wrong here as I've not been keeping up to date with this case, does that not imply Celsius are not only planning to just keep the contents of all earn accounts, but are also planning to try use the 90-day clawback rule to try to recover any withdrawals from earn accounts in the 90 days prior to them filing for bankruptcy? So even if you moved your funds from an earn account to a custody account, if you did it within the 90 day limit then those funds will be forfeited too?

Yes, you are right. Also, value must be less than 7575$. At first moment I believed it could incude every customers holding up to 7575$ on their accounts (including Earn program), but it would be too good to be true... Now let's see what is going to be decided by the court.


https://twitter.com/news_whales/status/1566011790277976067

[o_e_l_e_o]

From that tweet:

According to leaked court documents Celsius Network may request that people withdrew 90 days prior to Chapter 11 to return the funds by court order.

This would be something else entirely if it passes. Imagine heeding all the warning signs, getting out of Celsius just in time in the days or weeks leading up to their collapse, and then later getting a court order saying "Sorry, give us back all your money or face charges". We would have to change the phrase to "Not your keys, not your coins. Your keys, maybe still not your coins."

Looking more and more like the only safe way forward is to completely avoid every centralized exchange and lending platform in existence.

[PrimeNumber7]

So, and correct me if I'm wrong here as I've not been keeping up to date with this case, does that not imply Celsius are not only planning to just keep the contents of all earn accounts, but are also planning to try use the 90-day clawback rule to try to recover any withdrawals from earn accounts in the 90 days prior to them filing for bankruptcy? So even if you moved your funds from an earn account to a custody account, if you did it within the 90 day limit then those funds will be forfeited too?

I wouldn't use the word "forfeited", but yes, recent withdrawals from "earn" accounts may be subjected to clackback under bankruptcy laws, and the Celsius bankruptcy estate is going to be obligated to maximize the total return (as a percentage of total claims) of claimaints.

I would rather describe the process as account holders who had recently withdrawn may have to have the amounts withdrawn comingled with other Celsius assets, and the amount withdrawn would also be added to the claims of debtholders. I believe you had previously described the probable outcome of account holders as receiving "pennies on the dollar" of their deposits, however, I think this is unlikely, at least based on current financial statements. Any clawback is also going to be subjected to litigation

From that tweet:

According to leaked court documents Celsius Network may request that people withdrew 90 days prior to Chapter 11 to return the funds by court order.

This would be something else entirely if it passes. Imagine heeding all the warning signs, getting out of Celsius just in time in the days or weeks leading up to their collapse, and then later getting a court order saying "Sorry, give us back all your money or face charges". We would have to change the phrase to "Not your keys, not your coins. Your keys, maybe still not your coins."

Looking more and more like the only safe way forward is to completely avoid every centralized exchange and lending platform in existence.

I don't have the data to back this up, however, I think it is likely for many who have withdrawn to have other claims against Celsius, and any amounts demanded to be returned, that are not returned could be offset by other actual recoveries. This would be far less expensive than trying to go after individual account holders, although there is the potential that some who are not in the above situation may see their (hypothetical) "court ordered" demand to return coin to the Celsius bankruptcy estate to be sold to debt collectors, who in turn try to independently collect.

[o_e_l_e_o]

I would rather describe the process as account holders who had recently withdrawn may have to have the amounts withdrawn comingled with other Celsius assets, and the amount withdrawn would also be added to the claims of debtholders.

Yes, that's what I would expect too. So all money in earn accounts, and all money they can recover which was withdrawn from earn accounts in the previous 90 days, will simply be added to their pool of assets to be redistributed between all stakeholders. I still think the average user will end up with "pennies on the dollar", since all Celsius's big secured investors will take the majority of the funds, leaving little to be distributed among unsecured investors, i.e. regular users.

I don't have the data to back this up, however, I think it is likely for many who have withdrawn to have other claims against Celsius, and any amounts demanded to be returned, that are not returned could be offset by other actual recoveries.

And if they refuse to return their withdrawals if ordered, then I suspect they would void any claim they had for other assets still stored on the Celsius platform. What a nightmare for these users, and what despicable behavior from Celsius. Clearly trying to maximize returns for their large investors at the expense of their average users.

[PrimeNumber7]

I would rather describe the process as account holders who had recently withdrawn may have to have the amounts withdrawn comingled with other Celsius assets, and the amount withdrawn would also be added to the claims of debtholders.

Yes, that's what I would expect too. So all money in earn accounts, and all money they can recover which was withdrawn from earn accounts in the previous 90 days, will simply be added to their pool of assets to be redistributed between all stakeholders. I still think the average user will end up with "pennies on the dollar", since all Celsius's big secured investors will take the majority of the funds, leaving little to be distributed among unsecured investors, i.e. regular users.

Have you seen any financial disclosures or court filings that suggest that Celsius has a lot of secured creditors? In bankruptcy, equity holders typically are paid last.

I don't have the data to back this up, however, I think it is likely for many who have withdrawn to have other claims against Celsius, and any amounts demanded to be returned, that are not returned could be offset by other actual recoveries.

And if they refuse to return their withdrawals if ordered, then I suspect they would void any claim they had for other assets still stored on the Celsius platform. What a nightmare for these users, and what despicable behavior from Celsius. Clearly trying to maximize returns for their large investors at the expense of their average users.

Any decision on the legitimacy of claims is up to the bankruptcy court, not Celsius. I think it would be equitable if amounts that are ordered to be returned but are not are offset. So if a user was ordered to return $100, but did not, and unsecured creditors were due to receive $.70 on the dollar, the bankruptcy court would withhold $30 from that user's other recoveries.

I have never heard of a court voiding a debt because the debit holder does not pay their own debts to the party in bankruptcy.

[o_e_l_e_o]

Have you seen any financial disclosures or court filings that suggest that Celsius has a lot of secured creditors?

No, and as far as I am aware, neither a list of secured creditors or a statement that there are none has been made/filed. I'm basing these assumptions on the court documents they filed previous during the bankruptcy proceedings here: https://www.theblock.co/post/157647/celsius-bankruptcy-documents-claim-1-2-billion-balance-sheet-gap. With "Loans" of almost 1 billion dollars, on top of a $1.2 billion hole in their balance sheet, then there is not going to be much left to give back to the users.

I'd be happy to be proven wrong, but I think Celsius users shouldn't be holding their breath for a good outcome here.

[NotATether]

Have you seen any financial disclosures or court filings that suggest that Celsius has a lot of secured creditors?

No, and as far as I am aware, neither a list of secured creditors or a statement that there are none has been made/filed. I'm basing these assumptions on the court documents they filed previous during the bankruptcy proceedings here: https://www.theblock.co/post/157647/celsius-bankruptcy-documents-claim-1-2-billion-balance-sheet-gap. With "Loans" of almost 1 billion dollars, on top of a $1.2 billion hole in their balance sheet, then there is not going to be much left to give back to the users.

I'd be happy to be proven wrong, but I think Celsius users shouldn't be holding their breath for a good outcome here.

Besides, if Mt. Gox users had to wait years just to get their coins back, then I don't expect Celsius users to expect their money back after just a few months.

Sure, the Gox distribution was slowed down by lawsuits, but bankruptcy advisors are not known for acting fast.

[uneng]

Is it even possible for the court to force customers who withdrew on the last 90 days before the bankruptcy to return the funds to the platform? Are there legal consequences, especially for foreigner investors?

Does anyone know if the company continues paying its employees in a regular basis? If so, the longer this lawsuit takes the less money is going to remain for customers. I fear they are just spending most money as possible in wages to fill their own pockets, lefting less as possible to be splitted among everyone else in the end.