Celsius’ customers are losing hope of seeing their money back as the crypto-meltdown continues
It has been three weeks since crypto lender Celsius Network took the drastic step to stop customers’ withdrawals. Many people are beginning to wonder if they will ever see their money again.
Alla Driksne says that she has six figures worth bitcoin and ethereum – her life savings – tied up in a Celsius account. On June 12, the company said it had paused customer withdrawals, saying it had to “stabilize liquidity and operations.” The drinkers were not allowed to sleep for two days.
“Since it’s such a big company and there are so many people who trusted them, somewhere in my head, I hope maybe there’s a small, small chance of not losing everything,” said Driksne, who is 34 and stock online cooking class.
The crypto market is crashing, and the resulting credit crisis is affecting retailers and large companies. At least four other crypto companies – Babel Finance, CoinFlex, Voyager Digital Ltd. and Finblox – have told customers that they can not withdraw their money or the limited amount they can withdraw.
READ Why crypto lender Celsius needs more time before it can resume business as usual
Cryptocompanies such as Celsius have emerged in recent years to offer services that act like traditional banking tasks, such as paying interest on deposits and taking out loans. They often offer conspicuous interest rates on deposits, sometimes close to 20%.
What some customers learn the hard way is that cryptocurrencies can look and act like the traditional financial system, but they lack investor supervision and legal protection built into banks and brokerages. In particular, their deposits are not guaranteed by the federal government.
Celsius did not respond to requests for comment. State securities regulators in Texas, Alabama, Kentucky, New Jersey and Washington are investigating Celsius’ decision to freeze client accounts.
In a blog post on June 30, Celsius said they are continuing to “take important steps to preserve and protect assets and explore options available to us.”
“Our relationship with the community and our customers has been a source of pride for all Celsius team members, and we will continue to share information with our customers whenever and wherever appropriate,” the company added.
Celsius has hired restructuring lawyers and consultants to advise on a potential bankruptcy report, Wall Street Journal previously reported. The terms of use of the Celsius website state that in the event of a bankruptcy, customers may not be able to recover the cryptocurrencies in the accounts or the security they provide for loans.
Driksne opened a Celsius account after a friend mentioned the high interest rate. She began to have a bad feeling in early June, she said, after reading Twitter talk about growing financial problems in the company. On June 10, Driksne tried to withdraw her money. Over the weekend, her transaction was listed as pending, she said. It was finally canceled on June 12, she said, the day Celsius announced the freeze. She had planned to spend the money on buying a house.
READ EU crypto rules to force binding, USD currency to hold more reserves in the ‘Wild West’ market
The fall in prices for bitcoin and other cryptocurrencies is partly due to broader macro problems. Rigid inflation is causing the Federal Reserve to raise interest rates, raising concerns about a potential recession and sending investors fleeing risky assets.
But investors also have concerns about the crypto industry in particular. Prices turned for the worse in early May after the collapse of two sister cryptocurrencies, Luna and TerraUSD.
The panic spread quickly. The market value of the entire crypto sector crashed, falling from around $ 1.7 billion on May 1 to $ 872 billion last week, according to CoinMarketCap data.
Many crypto customers took out loans where they provided the crypto as security. Now that the value of their collateral is falling, lenders can in many cases issue margin calls and seize it all.
John Buzolits, a 35-year-old commercial real estate agent in Philadelphia, opened a Celsius account in March for his bitcoin. Using bitcoin as collateral, Buzolits took out a $ 62,500 loan in a stack coin called USD Coin.
Stablecoins are meant to maintain a peg to the dollar. Investors can earn high returns when they invest stack coins in so-called DeFi projects, short for decentralized finance.
In the wee hours of June 12, Buzolits became concerned and repaid his loan. He then proceeded to withdraw his six bitcoins, worth more than $ 170,000 at the time. The transaction was captured in a security check. He has not received bitcoin back.
Buzolits said he filed a complaint last week with the Secretary of State in Indiana, where he lived when he took out the loan.
“I think I’m a pretty fair person, but it definitely causes anxiety because the six bitcoins are a healthy part of my retirement,” he said. “Now I have to start over and rebuild from scratch.”
Several traders complained about the lack of communication from the company. One is Jackson Ling, a 37-year-old angel investor in Malaysia who has about $ 2,000 in bitcoin in Celsius.
“Everyone has been left in the dark here, no one knows exactly what is happening to them,” Ling said. “Are they insolvent or simply illiquid?”
Jake Greenbaum, a 32-year-old crypto influencer in Miami, is betting on a rebound. Greenbaum has solana tokens in his Celsius account that were worth more than $ 107,000 when the company announced the freeze.
Greenbaum, who calls himself the crypto king on social media, assumes he will not get his money back and counts it as the cost of doing business. He recently started selling his watches. He plans to use the money to buy more crypto.
This article was published in The Wall Street Journal, part of the Dow Jones
