Celsius Reveals Its Creditor List, 3AC NFTs, Terra-Luna, Voyager – Attack of the 50 Foot Blockchain

Of Amy Castor and David Gerard

“Scammers do not play on moral weaknesses, greed or fear; they play on weaknesses in the system of checks and balances, the auditing processes that are meant to supplement an overall environment of trust.” —Dan Davies, Lying for Money

Krissy and Alex Mashinsky

How are the crypto markets?

Crypto is a cooling market. The desperation is still there – but the cash from other retailers to fuel the desperation is gone.

(No, we have no idea why bitcoin is stuck around $19,000 either. Our guess is margin call levels so manipulating the price up is cheaper than taking the hit… but that’s just a guess.)

The real economy’s ongoing cash crunch will lead to more crypto Ponzi schemes being exposed. Crypto leaders are already jumping as fast as possible.

As more Ponzi schemes are exposed, expect more crypto operators to disappear. We’re a little surprised that Alex Mashinsky from Celsius hasn’t disappeared already.

The future of crypto reporting will be bankruptcies, indictments, criminal cases and regulations. We just come here and say “YES! Ha ha ha…YES!”

Celsius Network: geez doxxed me bro

Celsius must be discontinued, and the sooner the better. There is no viable business here, the money is gone, and dribbling away what remains to company insiders and bankruptcy experts does nothing to find more money for creditors.

The newly appointed censor, Shoba Pillay, should pull back the veil. We expect any serious third-party reports on Celsius to be annoying.

A hearing on 7 October concerned Celsius depots. (We explained the four types of Celsius customers in an earlier update.) The court will hold a two-part trial on the deposit on December 7 and 8.

Judge Martin Glenn ordered Pillay to produce an interim report on Celsius’ financial management and handling of customer accounts. This should be out next month. [CoinDesk]

The report will influence the court’s decisions on custody and priority claims. A preferential claim, otherwise known as a “clawback”, is made by the bankruptcy trustee against creditors paid within a certain period before the bankruptcy filing. The period is 90 days for creditors and 1 year for insiders.

If you received money as a customer from Celsius in the 90 days before your Chapter 11 filing, this means you – the bankruptcy law says the court and the public must know who you are. We talked about this in our last update.

So Celsius published its Schedules of Assets and Liabilities and Financial Affairs (SOFA) for each of its eight companies. The schedules contain the names and transactions of every Celsius user on the platform, going back 90 days. One of the documents is 14,000 pages long. [List of schedules]

The crypto world was furious! Celsius is “doxxing” its customers, and several on Twitter called it a “leak” of information. Namcios at Bitcoin Magazine suggested that “laws should prohibit the court from asking for this in the first place.” [Twitter, archive; Twitter, archive; Twitter, archive]

Crypto will have the benefits of laws, but not the responsibilities.

Both Celsius and the UCC wanted to publish this data anonymously, but Judge Glenn made it clear that he was not going to rewrite bankruptcy law for crypto. He agreed to redact customers’ home addresses and email addresses – but the names had to remain a public record. [Claims process FAQ]

The public data is already being combed, for things like crypto influencers telling Celsius users to just trust the company and hold, while withdrawing their own funds. [Twitter]

Take care of the team

Celsius’ schedule of assets and liabilities reveals that company executives removed at least $17 million in crypto from the platform prior to its July bankruptcy filing.

Mashinsky withdrew about $10 million in crypto in May. Celsius co-founder Daniel Leon withdrew about $7 million (and another $4 million worth of what CEL termed “collateral”) between May 17 and 31. [Coindesk; FT]

At the same time, Mashinsky amply assured customers that their money was safe. The state of Vermont estimates that the company had been insolvent since 2019. [Twitter, archive; Decrypt]

We noted last time that Mashinsky stepped down as CEO. Leon has also resigned. [Coindesk]

Celsius also reported paying former CFO Yaron Shalem over $200,000 from December 2021 to March 2022. Shalem was released from Celsius in November 2021, when he was one of 10 people arrested by Israeli authorities in connection with alleged fraud at other crypto firms. [Twitter]

Coffeezilla shows how Mashinsky’s wife Krissy withdrew $2.7 million in crypto from the platform in May. [Twitter]

Mashinsky: Trust me

Celsius UCC held a Twitter Room meeting immediately following the Oct. 7 hearing, where White & Case attorney Greg Pesche answered creditor questions. [YouTube]

Mashinsky joined an unofficial Twitter Spaces meeting on October 5 to explain how easy it should be to get Celsius out of Chapter 11. Mashinsky’s stock trading has always been new improbable schemes to make money. “Returning coins plus mining is enough to be profitable and return all the assets to all the users, and for that you don’t need any licenses. Nothing.” [YouTube]

Why are creditors even giving this guy their time? Only because they really, really, really want to believe that they will get their money back.

(They won’t.)

The next Celsius “341” creditors’ meeting is on 13 October at 10:00 a.m. ET.

Dirty Bubble notes that Celsius also bailed out of tens of millions of dollars in compensation from the Badger DAO after the DAO was exploited in December 2021. [Twitter; Medium post]

Three Arrows Capital

Teneo, the business advisory firm running the liquidation of Three Arrow Capital (3AC), now has its hands on the extensive NFT collection owned by Starry Night Capital, a fund created by 3AC and the pseudonym Vincent Van Dough. [Twitter] Teneo somehow got Van Dough to fully cooperate with them. [Teneo letter, PDF; Decrypt]

Here is Van Dough proudly announcing its partnership with the 3AC founders in August 2021. [Twitter, archive]

Most of the collection – 464 NFTs so far! — has already been moved to a new wallet on OpenSea. There are plenty of gems to see here, including a large selection of rare pepes. Although we are a little disappointed not to see our friend CryptoDickButt #1462 in there. [OpenSea wallet]

Starry Night spent at least $35 million in crypto on NFTs, because NFTs are clearly a brilliant investment for a leading crypto hedge fund! Teneo plans to sell the assets to raise money for 3AC creditors. It’s a shame that the NFT market has completely crashed and died, as Amy recently noted in Artnet. [Dune Analytics]

Teneo has created a website with updates on the liquidation. There is still no news on the whereabouts of 3AC founders Su Zhu and Kyle Davies. [3acliquidation.com]

Terra-Luna

South Korea clips Do Kwon’s wings. His passport has been revoked, which should put a damper on his ability to travel, although he insists he is not on the run. This is because South Korea has already issued a red notice from Interpol for Kwon. [Notice, Korean; Techcrunch]

Kwon claims that South Korea did not freeze his crypto. [Twitter]

Prosecutors also sought an arrest warrant for Yoo Mo, Terraform Labs’ general manager of affairs, who allegedly used bots to launder trades and manipulate crypto prices, in violation of the Capital Markets Act. The decision was rejected, but the prosecution is considering applying again. [JTBC, in Korean; Yonhap News, in Korean; The Block]

Voyager Digital

Wave Financial is one of the companies bidding for Voyager’s assets, but lost out to FTX US, who we had all along tipped to win the auction. We’re not even sure what the point of the two-week blind auction was. Customer lists?

Voyager Digital is furious with Wave Financial’s interview with CoinTelegraph. In the Sept. 28 article, Wave said there were better offers on the table, but they were “passed over for strictly cash offers.” [CoinTelegraph]

Voyager filed a lengthy response to the court, saying Wave never made a qualified bid: [Filing, PDF]

If better offers were available, Voyager would have accepted them. Wave’s false statement appears to be a publicity stunt in an attempt to regain credibility lost in the market as a result of its poor performance at the auction.

We think Voyager protests too much.

Voyager’s next omnibus meeting is October 19.