Court documents filed recently in the bankruptcy cases of Voyager Digital and Celsius Network show that clients of both companies face potential financial trouble.
“The money my wife and I were hoping to use for our young daughter’s education in the future is now closed,” Voyager customer Neeraj wrote in one. Statement To judge Michael Wills.
“I’ve been in shock ever since Voyager stopped withdrawals. It’s like your bank is no longer allowing you to withdraw from your savings accounts. How do you feel? Don’t you feel cheated? will do?”
Neeraj’s letter is one of more than a hundred filed in court and made available to the public by judges in these cases, including disclosures of users who have lost money or believe they were misled by each company. was.
On June 12, Celsius told its customers that it would stop all withdrawals on its platform. Three weeks later fellow crypto lender Voyager did the same thing. In first two weeks Both Crypto Firms of July Chapter 11. filed for bankruptcy protection.
The fate of each platform’s customers is in the hands of the courts.
“Thousands of Voyager customers hope that you will keep our lives and livelihoods in mind as you preside over this matter.” wrote Jacob Hammodeh, a customer who trusted Voyager with his stake.
Hammadoh highlighted the company was “publicly listed, which means responsible management of my assets.” Hammadoh points out that the platform’s CEO, Stephen Ehrlich, was positioned as a veteran in the industry, and that “Voyager claimed full FDIC protection on USD balances.”
Last week, the Federal Reserve and the FDIC issue of joint letter Voyager stops and avoids making false statements about its FDIC insurance status.
The customer acknowledges that he strongly considered withdrawing his crypto in early June, but a . was “not convinced” by voyager press release Which read: “The company is well capitalized and well positioned to weather this cycle and protect clients’ assets.”
Using half of her proceeds from the sale of the family business, Lisa Dagnoli, a mother of four, invested more than a million dollars in bitcoin, ether and USDC on Voyager’s platform. Now, he is angered by the firm’s proposal to reimburse creditors with equity and tokens for a new company.
“I take responsibility for the investment and risk, but Voyager leaders and Voyager Digital, LLC need to take responsibility for giving back what we owe,” Dagnoli wrote in a statement. Letter filed in court.
‘Business is going great’
Become a creditor of Celsius Network like other customers Who has been interviewed by Yahoo FinanceOne part is seeking the removal of Celsius’s management after the company halted customer withdrawals, judging by its statements as of June 12.
Celsius outstanding $4.7 billion to its customers and is facing a $1.2 billion gap between reported assets and outstanding liabilities, as shown in its latest bankruptcy presentation. Earlier this month, the company issued repayment to customers through its bitcoin mining subsidiary.
Robert Cominos, a nearly year-old Celsius customer who “moved around $250,000” on its platform, claims Letter Interviews given by the company’s co-founder and CEO, Alex Mashinsky, convinced him to take this step.
“Business is going great,” Mashinsky told a reporter on April 13,
“Celsius is a magnet for yield, a magnet for those who want to save and earn income,” Mashinsky Told Yahoo Finance in June 2021, “We just passed 800,000 users and many of them live off that income.”
in second Celsius LetterAn investor who has deposited 6 figures of his life savings with the platform cites a celsius medium post Published on 7 June which attempted to rebut its rumored financial problems. In his post, Celsius claimed that “a handful of haters” were spreading misinformation about the company.
“Celsius has reserves (and more than enough ETH) to meet the obligations set forth by our comprehensive liquidity risk management framework,” the company said.
not everything but nothing
Bankruptcy litigant Daniel Saval told Yahoo Finance that these personal stories “are going to make judges understand that for many of these clients the impact of these bankruptcies is wide-reaching and deeply affecting their lives.” “
However, whether or not to make these clients perfect is still a difficult path to chart in view of Saval for clients.
“I think it’s going to be a challenge,” Sawal said. “The way these exchanges work is that they typically bundle the contents of customer accounts together. This means that they do not have separate accounts. As a result, in those circumstances, the likely outcome is this. that the property shall be deemed to be owned by the bankruptcy estates, as opposed to the ownership of the clients themselves.”
In bankruptcy proceedings, secured creditors usually get first on any money. Unsecured creditors are usually next on the list. But before a claimant receives his dues, insolvent firms must pay operating costs and legal fees through the bankruptcy process.
“There is no blueprint under the Bankruptcy Code for customers to decide what happens in these circumstances. This is all new,” Sawal said.
“If [the customers] In theory, if they are considered unsecured creditors, they can mix with all other types of creditors. In theory they could all be grouped together,” Saval explained.
Although both crypto lenders have proposed Some form of repayment planAccording to Adam Levitin, professor at Georgetown School of Law and financial advisor, principal of the Gordon Group, the distribution plan is not fixed in any case.
Whether the distribution is paid in crypto assets or fiat currencies depends on whether companies liquidate their remaining crypto assets and second, the distribution plan is agreed upon by a majority of the Organized Creditors Committee of either case. Is.
“I can say with almost absolute certainty that customers are not going to get anything and will not be paid in full,” Levitin told Yahoo Finance. He added that because either proceedings “could go on for years,” clients hoping to pay would need to account for other factors such as crypto market volatility and inflation.
Earlier this month, Voyager responded with a joint offer By FTX and Alameda Research which offered to buy customer accounts. The proposal argued that it reduced the risk for customers placing unsecured claims with Voyager, in exchange for FTX potentially acquiring those creditors as new customers.
in his answerVoyager claimed that the proposal made “multiple false and misleading claims” about its business. “This is a low-ball bid designed as a white knight’s defense,” the legal document states.
Such transactions can reduce the risk to customers who have unsecured claims during the period of complicated bankruptcy proceedings. But, as Levitin pointed out, that won’t change whether customers see full reimbursement on their claims.
Letters from Celsius and Voyager customers show that users are asking for their assets back, although they indicate clear uncertainty about whether they will ever see that money again.
“I’m sorry to believe now (sic) Their marketing strategy and potentially losing my family’s life savings,” Voyager customer Digant Goyal wrote in his letter Judge Wills.
Goel’s sentiment is echoed by Daniel James Hawley who told the court“The vast majority of my lifetime wealth accumulated through a few ups and downs as an entrepreneur is locked up on Voyager without telling me when and how often I’ll get access to them again.”
“My savings to buy a house, build and support a family, and invest in my future, are all locked in that account,” he said.
Chapman Shawlcross, a retired firefighter, held $244,000 in ETH and ADA before moving assets on BlockFi to the Celsius network, another crypto lender, “based entirely on positive feedback,” he wrote in his Letter, “And, now I know that the information I collected was curated BS”
For Amanda Gan, a Celsius client, the bankruptcy of the company and the uncertainty surrounding her $167,000 in crypto assets has created a “significant crisis” according to her. Letter,
“Losing this amount of our savings will have irreparable consequences for our family,” she said.