Cryptocurrency lender Celsius Network advertised yields of 17% up to mid-June when the withdrawals were frozen and then filed for bankruptcy in New York a month later. Marketing itself more like a bank but without following the same regulations, it captivated a customer base worldwide, including Australians, most of whom had their assets sealed up as prices of cryptocurrency crumbled and the company was wrecked.
The predicament of these investors in the retail segment was highlighted in current weeks by software engineer and cryptocurrency critic Molly White, who started tweeting to move excerpts from tons of letters sent to the New York bankruptcy court and shared in court exhibits.
“The stereotype of people who are putting money into crypto is … young, technologically savvy men,” Ms White said. “And that did not seem to be demographic in the letters. There were also a lot of people who were saying, ‘this is my life savings, my pension, I worked 10, 20, 30 years to save this money.'”
Celsius almost had 300,000 active users with balances of above $US100 ($144) as of July 2022 and a $US1.2 billion deficit when it filed for Chapter 11 bankruptcy in the Southern District of New York. Celsius delivered a wide range of services, inclusive of a service where users were allowed to borrow against cryptocurrency assets transferred to the company or to earn high rates of reward on their deposits.
As Celsius presented a bright picture of massive yields, it seemed impossible to a few critics that such huge numbers could be sustained without making possibly dangerous investment decisions with the funds of its depositors across the globe.
Campbell Harvey, a finance professor at Duke University, said the Celsius affair was simple: “This is a company that basically took customer deposits, if you want to call them that, and then invested in hazardous products.” From other matters, Dr Harvey said, Celsius seems to have invested in cryptocurrency products that were extremely illiquid when the company required money back immediately.
The bankruptcy filing of Celsius resumes to be a rough period for cryptocurrencies, and other high-end platforms, including Vauld, Babel Finance, and Voyager, have been struck by worries in recent weeks.
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