The descent into hell of Celsius customers, a fallen cryptocurrency platform

published on Sunday, July 31, 2022 at 10:34 am

An Irishman about to lose his farm, an American with suicidal thoughts, an 84-year-old widow who lost all her savings: the customers of the Celsius cryptocurrency investment platform desperate.

Since the company filed for bankruptcy in mid-July, hundreds of letters from former users have gone to the court full of anger, shame and, often, regret.

“I know there are risks”, said for example a client, who did not sign his testimony. “It seems worth it.”

Celsius is one of the most important players in this sector, which lends money and pays deposits, playing in the land of banks that do not provide the same guarantee.

The platform offers interest rates of more than 18% for savers, but 0.1% for borrowers. It had 1.7 million customers in June.

But faced with the cryptocurrency plunge – bitcoin has lost more than 60% since November – some companies have frozen withdrawals and/or file for US bankruptcy.

“From the single mother from Texas who works hard and struggles to pay her bills, to the school teacher in India who puts her hard-earned money into Celsius – I think I speak for everyone in when I say I feel betrayed. , embarrassed, sad and angry,” wrote “EL,” a customer.

Celsius and its boss, Alex Mashinsky, assure that the platform is a safe place to deposit its cryptocurrencies. It now owes $4.7 billion to its clients.

– “Crushed” –

Their letters, which are accessible in the public database of the court, relate often dramatic consequences, when 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.

“Alex Mashinsky completely lied to me,” said one, who described himself as “a loyal Celsius customer since 2019.” “Alex said Celsius is safer than banks,” he added.

On June 7, Celsius was proud “to have one of the best risk management teams in the world”.

“We’ve been through other crypto declines (this is our fourth!), Celsius is ready,” the company said.

He claims to have reserves to pay his obligations. Withdrawals work normally.

But that all changed on June 12, when he announced the freeze.

Without it, he previously explained, withdrawals could be “accelerated”, allowing “some customers – the first to act – to be paid in full, leaving others to wait”.

This, he promised, to restructure to “maximize the value for all stakeholders”.

Some customers will receive a message from the company immediately.

“When I finished reading the email, I collapsed on the ground, my head in my hands, trying to hold back my tears,” said one person who has approximately $50,000 in assets stored in Celsius.

– Stress and shame –

Clients who said they were hit harder, including one individual who claimed to have put up $525,000 in government loans, said they were considering suicide.

Others spoke of stress, sleep loss and their deep shame at risking their savings or their funds set aside to pay for their children’s college.

As a private company, in an unregulated sector, Celsius has few obligations to fulfill.

“Most of these companies lend without collateral or with insufficient collateral,” said Antoni Trenchev, co-founder of Nexo, another crypto platform that he says has avoided a more stringent lending policy and “prudent risk management”.

One of the clients is an 84-year-old woman, who decided to put her $30,000 in cryptocurrency savings in Celsius a month before the withdrawal freeze.

The victims are hoping that the court handling the bankruptcy process will help them recover at least some of their money. This can take years.

“Obviously I feel sorry for anyone who loses their funds in this way,” Don Coker, a legal expert on banking and finance, told AFP. “But this is an area where they need to be aware of the risks.”

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