Celsius leadership’s bankruptcy plans include potentially turning its debt into a new cryptocurrency

Many crypto firms have gone belly up in 2022, but none are as dumb as Celsius. The company now wants to issue IOU tokens to customers who they owe money to.

Celsius has been dealing with their bankruptcy plan since freezing customer withdrawals earlier this year in June. Now, in an apparent audio leak of an internal all-hands meeting, the company really appears to be grasping at non-fungible straws. The leadership has proposed issuing IOU crypto tokens to clients who have not been made whole. Tiffany Fong provided the leaked audio, but CNBC was unable to verify the audio independently, but former employees confirmed that the communications were indeed real. Real stupid.

Tiffany Fong, who claims to be one of the 500,000 Celsius clients with money trapped on the platform, says she received the audio recording from an anonymous self-identified employee. The company has been trying to figure out solutions for the $8 billion in loans and $12 billion in assets that have been in limbo since Celsius filed for bankruptcy earlier this year.

The recording features Celsius co-founder Nuke Goldstein suggesting the release of new “wrapped tokens” that will serve as a crypto IOU to customers. The hope is that customers will hold onto the tokens long enough for Celsius to emerge from bankruptcy. Now this seems like a tall order for clients who have not had access to their holdings for months to go long a new cryptocurrency issued by an insolvent company, but this it the kind of magical thinking that got Celsius into the current predicament they find the company in. As of right now, Goldstein believes that the tokens would be valued at less than the clients had originally invested.

Peanuts' Lucy pulling the ball away from her pal Charlie Brown.
Investing in interest-bearing crypto products is as risky as kicking a football while Lucy is holding it.
Source: Peanuts

This terrible IOU token reimbursement plan isn’t the only idea Celsius’ leadership is kicking around, but it is certainly the dumbest. Chief Technology Officer Guillermo Bodnar also said that the company is working on a transaction management system designed to track the company’s blockchain assets. That’s right, the company which managed billions of dollars of digital assets never really had the proper tracking software. It is truly shocking that this outfit was unable to detect the absurdly poor risk management taking place, but then again the Celsius “Earn” accounts carried promised annual yields as high as 17%.

It’s this kind of magical risk-taking that really makes most people feel like the broader cryptocurrency market is a Russian nesting doll of Ponzi schemes and scams. With management kicking around such stupid ideas as Celsius attempts to emerge from bankruptcy, it is hard to believe that any clients feel any more confident after hearing these ridiculous solutions.

Luminary

Asif Khan is the Luminary and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary’s Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.

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