Australian investors are left with nothing as cryptocurrency giant Celsius goes bankrupt

Cryptocurrency lender Celsius Network advertised returns of 17% until mid-June, when it blocked withdrawals, then filed for bankruptcy in New York a month later.

Marketing itself is much like a bank, but without the same regulations, it has attracted a global clientele, including Australians, many of whom have seen their assets frozen as cryptocurrency prices plummeted and the company plummeted.

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The plight of these retail investors was brought to light in recent weeks by software engineer and frequent cryptocurrency critic Molly White, who began tweeting heartwarming excerpts from hundreds of letters sent to the US bankruptcy court in New York. and shared in exhibitions.

“The stereotype of people investing money in cryptocurrencies is … tech-savvy young males,” White told ABC.

“And it didn’t seem to be the demographics in the letters.

“There were also many people who said: ‘this is my savings, my pension, I worked 10, 20, 30 years to save this money'”.

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Ms. White also shared letters from people claiming to reside in Australia, many of whom described their utter despair and even suicidal thoughts after being blocked from accessing the funds.

One woman said the impact on her family was severe. She has included an email she sent to Celsius’ management asking to be able to withdraw some of her funds. The email included an ultrasound image of her unborn baby.

Others wrote of their emotional turmoil:

“I lost everything. How can I explain this to my son? I am ashamed of myself.

“It was our savings. It was our chance to have a baby and finance the medical bills. It was our chance to take care of our parents as they get older. “

A father of three in Australia wrote that he had “his savings in a Celsius earnings account” and even convinced his father to deposit cryptocurrency assets in Celsius as a “safe haven”.

In addition to putting a personal face on the cryptocurrency crash, many letters cite the online presence of Celsius CEO Alex Mashinsky as a key reason to invest.

They point to his regular YouTube AMA or “ask me anything” sessions, in which he projected utmost confidence to the end and a willingness to denounce what he considered “misinformation” about his company on Twitter.

Ms. White was also impressed with the number of letters specifically mentioning Mr. Mashinsky and his online personality.

“Those [AMA sessions] clearly it worked very well in building trust in him and the platform, “he said.

“And people basically believed that Alex Mashinsky as a person wouldn’t do that to him.”

Celsius CEO Alex Mashinsky in November 2021 when bitcoin was on the rise.(Getty: Piaras O Midheach)

“We are behind and we are trying to be loud”

Claire * is one of the Australians with assets locked up in Celsius who wrote to the judge.

She returned to Australia in 2020 after more than a decade living in the United States and after a career change. A college course in financial technology introduced her to cryptocurrencies and she shone in the industry.

But Claire said she struggled to find a job in the field and when she tried to start her own business she found that Australian banks were not lending her due to a lack of local credit history.

An American cousin introduced her to bitcoin mining and ended up blocking bitcoin worth around $ 50,000 as collateral for a Celsius loan.

“I was very drawn to their lending structure because I couldn’t get a loan here for nothing,” she said.

“Cryptocurrency for someone in that situation is … more attractive.”

While not in as bad a situation as other Celsius clients, Claire said the goal of writing her letter was to ensure the voices of small investors were heard during the corporate debt review.

It is not yet clear how the process will develop.

Celsius’s terms and conditions warn that an account with the company “is not a checking or savings account and is not covered by loss insurance” and that “any eligible digital assets … may not be recoverable” after the failure.

“The big kids will take the lawyers and make noise,” he said.

“We are in the back and we are trying to be noisy.”

The risk is not over for Australian investors

Celsius had approximately 300,000 active users with balances over $ 100 ($ 144) in July 2022 and a $ 1.2 billion deficit when it filed for Chapter 11 bankruptcy in New York’s Southern District.

The company offered a number of services, including the ability to borrow cryptocurrency assets transferred to the company or to earn high reward rates on those deposits.

But while his team presented a bright picture of huge returns, it seemed impossible to some critics that such numbers could be sustained without making potentially dangerous investment choices with the funds of its international depositors.

Campbell Harvey, a finance professor at Duke University, said Celsius’s situation was ultimately simple: “This is a company that basically took deposits from customers, if you want to call them that, and then invested in very risky products.”

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