Celsius Network is a giant Ponzi scheme as the network, which was once a titan in the world of crypto lending is currently facing charges that it was conducting a Ponzi scheme by compensating early depositors with the money that it collected from new users and is currently in the process of filing for bankruptcy. Some of the 1.7 million people who lost money because of the supposed scam are now asking for help. They are asking the Southern District of New York to help them recover their money.
Christian Ostheimer, who is 37 years old and lives in Connecticut stated that he had entrusted Celsius with his retirement savings. However, he has since lost more than $30,000, which has caused him to face “insurmountable tax complications.” This was in a letter that was submitted as evidence in court.
In his letter to the judge, Ostheimer wrote, “It is in your hands, honorable judge, to make this a different case where not the lawyers, the attorneys, the big corporations, and the managers get paid out first but the little man, the mom and pop, the college grad, the granny and grandparent — all those many small unsecured creditors — so that they are not like usual at the end of the chain where they lose everything.”
The question of who will be reimbursed first, in the event that such a day ever arrives, hangs heavy over the proceedings of the bankruptcy case.
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Celsius Network is a giant Ponzi scheme as victims beg for help
The CEO of the crypto currency lender, Alex Mashinsky, stated that the company had $25 billion in assets. This is under control at its peak in October 2021. Now, Celsius has just $167 million “in cash on hand,” which the company claims will offer “ample liquidity.” This is to continue operations while the company is in the process of reorganization. According to the bankruptcy petition that Celsius has filed, the company owes its customers around $4.7 billion.
This document also reveals that Celsius has more than 100,000 creditors. Some of whom lent money to the platform without providing any security to back up the deal. On the list of its top 50 unsecured creditors is the trading business owned by Sam Bankman-Fried called Alameda Research.
Also on the list is an investment firm with headquarters in the Cayman Islands. These creditors will most likely be at the front of the queue to get their money back. This will leave ordinary investors and smaller investors holding the bag.
There are no legal protections in place to protect users’ money in case something goes wrong. This is different from the traditional banking system, where customers’ deposits are usually insured.
Any digital asset that is transmitted to the Celsius platform is considered to be a loan given by the user to Celsius. This is stated in the terms and conditions that are provided by Celsius. This is because Celsius did not provide any kind of security. The cash contributed by customers was effectively merely an unsecured loan to the site.
Celsius terms and conditions
Furthermore, the Celsius terms and conditions state that “in the event that Celsius files for bankruptcy, any Eligible Digital Assets used in the Earn Service or as collateral under the Borrow Service may not be recoverable.” Also, that customers “may not have any legal remedies or rights in connection with Celsius’ obligations.”
This disclaimer can be found in the fine print of the terms and conditions. The revelation seems like an attempt to provide oneself broad protection from any legal misconduct. A misconduct that could occur in the event that things ever go south. On July 19, Celsius released a paper that outlined the company’s next steps for its clients. In it, the site stated that its Chapter 11 bankruptcy plan will “give customers the choice. That is, at the customers’ election, to recover either cash at a discount or stay “long” crypto.” However, it is unknown whether or not users will ever see their money again.
The whole process shows how important enforcement is to U.S. crypto policy.
It appears that some precedent will be set in U.S. bankruptcy courts in the coming months. This is because lawmakers deliberate over formal legislation on Capitol Hill. The Securities and Exchange Commission has become one of the best regulators in the country. This is especially when it comes to getting rid of Ponzi schemes and pyramid schemes.
Requests from potential investors
Retail investors have sent the court hundreds of letters pleading their case. They are asking to be moved to the front of the line so that they can get their money back.
Flori Ohm, a single mother of two kids who are both planning to attend college, stated that her family has been “severely harmed both in financial and emotional health.” This is as a result of the bankruptcy, which has caused her cash to become stuck on the platform. Ohm, who also takes care of her parents, reported that she is unable to sleep or concentrate on her work.
She stated, “I am working really hard to make a living,” and she meant it.
Jeanne Y. Savelle, who described herself as a “little retired old lady” living on a fixed income, said that she turned to Celsius in search of a way to supplement her monthly Social Security check. This is in order to stretch the dollar amidst record levels of inflation. Jeanne Y. Savelle was able to find a solution to her problem.
According to Savelle, “I acquired my modest quantity of crypto in the hope that I would earn enough. This is to help me weather the next few years, kind of a safety net.” “Yes, I am aware that the buyer should be cautious. However, I concur that there has been an excessive amount of deceit.”
Others have suffered a complete and total loss: Since Celsius stopped all withdrawals, Stephen Bralver, a citizen of California claimed that he has less than $1,000 left in the bank account he uses to pay for his family with Wells Fargo. This account is now his sole source of cash to provide for his family.
Cries from Victims
“There is just no way that I can continue to provide without access to my assets at Celsius.” This was in a letter to the New York judge who is presiding over the Celsius bankruptcy proceedings.
“This is an emergency situation, merely to keep a roof over the heads of my family and food on their table.” This is according to what Bralver wrote.
Sean Moran of Dublin stated in his letter that his family had been evicted from their home in Ireland. This is because they were unable to keep the family farm. “I can’t believe that they lied to us on the weekly AMA [ask-me-anything events] about not trusting banks, whereas all along they were wolves in sheep’s clothing with false promises and misleading information,” Moran said. “I can’t believe that they lied to us on the weekly AMA [ask-me-anything] events.” I’m mentally unstable. My family is really upset since I decided to put my confidence in Celsius and give them hope for a brighter future.
A sense of betrayal stems from the breach of trust that occurred between Celsius CEO Alex Mashinsky and his clients. This feeling of betrayal comes up over and over again. This goes beyond the financial ruin that each letter talks about.
Three weeks after all withdrawals were stopped by Celsius due to “extreme market conditions” and just a few days before the cryptocurrency lender finally filed for protection under Chapter 11 of the United States Bankruptcy Code, the platform continued to advertise on its website in large bold text annual returns of nearly 19 percent that were paid out every week.
On July 3, the website claimed, “Transfer your cryptocurrency to Celsius and you may be earning up to 18.63 percent APY in minutes.” This offer is valid for a limited time.
Ralphael DiCicco spent $15,557
Ralphael DiCicco, who declared holdings of around $15,557 worth of crypto assets on Celsius, said that the marketing tricked him into buying them.
“I trusted all of the ads, social media posts, and advertising. This ad demonstrated Celsius to be a savings account with good interest and minimal risk.” “We were assured that our money was safer at Celsius than it would be at a bank.” This is according to what DiCicco has written.
“Pretty much everything I’ve saved up throughout my life is in this pot…” “I hope you can come to the conclusion that it is in the best interest of all parties concerned to repay the smaller investors first… before any restructuring takes place,” DiCicco stated.
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The statement by Travis Rodgers of Phoenix stated that he made multiple phone calls to Celsius Network and that the company assured him over and over again, even as recently as two days before it locked depositors’ accounts, that there was no risk to client assets and that there was no possibility of the company going bankrupt. Rodgers said that he had taped a number of those phone calls. He said that the value of all of his Celsius assets, which are spread across 11 cryptocurrencies, is 40,000 USD.
The weekly Ask-Me-Anything events that Mashinsky hosted on YouTube were mentioned in multiple letters. This includes one that was sent in by Stephen Richardson, who itemized the many ways in which he feels that Mashinsky deceived the public in order to lure new customers into the scheme. Richardson also sent in a letter in which he detailed the many ways in which he feels that Mashinsky deceived the public in order to lure new customers into the scheme.
Since he signed up, Richardson has stated that he has watched each and every Friday AMA.
“Alex would talk about how Celsius is safer than banks because they supposedly don’t rehypothecate and use fractional reserve lending like the banks do,” wrote Richardson. “Alex would talk about how Celsius is safer than banks because they supposedly don’t use fractional reserve lending like the banks do.”
“I currently have six figures’ worth of crypto locked in my Celsius account that is unable to be withdrawn, despite Alex’s claims mere hours before withdrawals were closed that nobody had any issue withdrawing from Celsius and that everything you hear to the contrary is simply “fud” [fear, uncertainty and doubt],” the user wrote. “This cryptocurrency is locked in my Celsius account, so I can’t take it out.”
If they are unable to get their money back, some people have even indicated they have considered ending their own lives.
Katie Davis, a resident of Australia, begged the judge to allow her and her husband to retrieve the $138,000 that is now held hostage on the Celsius platform.
Davis noted that it was “horrifying” to consider the possibility of losing that kind of money. She reportedly said in her letter, “If I do not get it back, I will terminate my life since the loss will substantially harm both my family and I.”