Crypto lending is going badly for many investors who are now seeing very real risks arise as companies like Celsius go bankrupt, leaving withdrawals and cash frozen.
“I knew there were risks,” one client said in an unsigned letter to the judge handling Celsuis’ multi-billion dollar bankruptcy, one of many such letters. “It seemed like a worthwhile risk.”
Celsius CEO Alex Mashinsky has made the platform a safe place to invest, according to Barron’s reports. Customers deposited crypto with high interest, and the company lent and invested the deposits.
But as the crypto itself faced mounting problems, with bitcoin losing about 60% of its value from an all-time high in November, the company could no longer cover its loans.
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Celsius allegedly owed users $4.7 billion, according to a court filing from early July. So far there is no clear way out for the company.
Since withdrawals and funds were frozen, letters have been sent to an online public court detailing users’ tragic stories of losing their savings.
The letters often featured the theme of people acting on the belief that Celsius was “safer than banks”, according to one letter saying the person had been a customer since 2019.
Another letter said the writer felt “betrayed, ashamed, depressed, angry”.
Celsius’ withdrawal freeze generated an avalanche of problems and made many investors realize that they couldn’t get their money back because of the client agreements they had signed.
Read more: Bankrupt Crypto Lender Celsius: We Own Customer Funds
The agreements stipulated that the funds deposited were “the property of Celsius” and not those of the clients.
Frances Coppola, a crypto columnist, called Celsius a “ghost bank” rather than an asset manager.
“Bank deposits are not even ‘customer assets’, much less ‘assets under management’. These are unsecured loans to the bank. They are therefore liabilities of the bank and fully exposed to the risk of bankruptcy. Depositors in a bank have no legal right to return their funds.
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