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

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

An Irishman about to lose his farm, an American on the verge of suicide, an 84-year-old widow who has lost all her life savings: customers of cryptocurrency investment platform Celsius are in despair.

Since the company filed for bankruptcy in mid-July, hundreds of letters have been received in court from former users, filled with anger, shame, and often regret.

“I knew that there were risks,” says one client, for example, who did not sign his statement. “It seemed worth it.”

Celsius has been one of the major players in this sector, lending money and remunerating deposits and gambling on bank floors without offering the same guarantees.

The platform offered interest rates of over 18% for savers but 0.1% for borrowers. In June it had 1.7 million customers.

But amid the cryptocurrency’s plunge — Bitcoin down more than 60% since November — several companies have frozen withdrawals and/or filed for US bankruptcy.

“From the single mom from Texas who works hard and struggles to pay her bills, to the Indian schoolteacher who has bet her hard-earned money on Celsius, I think I speak for everyone when I say that I feel betrayed , embarrassed, depressed and pissed off,” wrote EL, a customer.

Celsius and its boss, Alex Mashinsky, had assured that the platform was a safe place to deposit their cryptocurrencies. It now owes its customers $4.7 billion.

– “Collapsed” –

Their letters, available in the court’s public database, tell of often dramatic consequences, whether the loss amounts to hundreds or millions of dollars.

They come from all over the world, from novice crypto enthusiasts to evangelists of these new assets. Almost everyone agrees on one point: their trust has been abused.

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

On June 7, Celsius boasted of “having one of the best risk management teams in the world.”

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

She claimed to have the reserves to pay her commitments. Withdrawals worked normally.

But everything changed on June 12 when she announced lockdown.

Without it, she explained at the time, withdrawals would have “sped up” so that “some customers – who act first – get a full refund and the others have to wait.”

It’s possible, she promises, to restructure to “maximize value for everyone involved.”

Some customers then receive a message from the company.

“When I finished reading the email, I collapsed on the floor with my head in my hands trying to hold back my tears,” said a man who had about $50,000 in assets stored at Celsius.

– stress and shame –

Customers who say they are more affected, including one person who claims to have borrowed $525,000 from the government, say they have had thoughts of suicide.

Others talk about stress, lack of sleep, and their deep shame at risking their life savings or money set aside to pay for their kids’ college.

As a private company in an unregulated sector, Celsius had few obligations to meet.

“The majority of these companies have been lending with no collateral or with insufficient collateral,” says Antoni Trenchev, co-founder of Nexo, another crypto platform that he says has gotten away with tighter lending policies and “prudent risk management.”

One of the clients is an 84-year-old woman who decided to invest her $30,000 in cryptocurrency savings a month before Celsius stopped paying out.

The victims hope that the court handling the bankruptcy proceedings will help them recover at least part of their money. It could take years.

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