‘I was in shock’: Letters reveal financial hardship after Celsius and Voyager bankruptcies – Yahoo Finance | Vette Leader

Recent court documents filed in the Voyager Digital and Celsius Network bankruptcy cases show the financial ruin customers of both companies may face.

“The money my wife and I planned to use to educate our young daughter in the future is now locked up,” Niraj, a Voyager customer, wrote in a statement to Judge Michael Wiles.

“I’ve been in shock since Voyager stopped paying out. It’s as if your bank no longer allows you to withdraw from your savings accounts. How would you feel? Wouldn’t you feel betrayed?” he added.

Niraj’s letter is one of more than hundred filed in court in these cases and released to the public by judges, containing revelations of users who have lost money or believe they have been duped by each company.

On June 12, Celsius informed its customers that it would freeze all withdrawals on its platform. Three weeks later, his colleague Voyager did the same. In the first two weeks of July, both crypto firms filed for Chapter 11 bankruptcy protection.

The fate of the individual customers of the platforms lies in the hands of the courts.

“The thousands of us Voyager customers hope that you will consider our lives and livelihoods carefully as you lead this case,” wrote Jacoub Hammodeh, a customer who has trusted Voyager with his holdings.

Hammadoeh highlights that the company “was listed on the stock exchange, which implies responsible management of my assets”. Hammadoeh points out that the platform’s CEO, Stephen Ehrlich, was positioned as an industry veteran and “Voyager claimed full FDIC protection on USD balances.”

Stephen Ehrlich, CEO and co-founder of Voyager Digital Ltd. speaks during the Piper Sandler Global Exchange and FinTech Conference in New York City, U.S. June 8, 2022. REUTERS/Brendan McDermid

Last week, the Federal Reserve and the FDIC issued a joint letter urging Voyager to misrepresent its FDIC insurance status.

The client admits that it seriously considered withdrawing its crypto in early June, but was “assured not to do so” by a press release from Voyager, which stated: “The company is well capitalized and in a good position to to weather this cycle and protect client assets.”

Using half of her proceeds from the sale of a family business, Lisa Dagnoli, a mother of four, deposited over $1 million in Bitcoin, Ether and USDC on Voyager’s platform. Now she is outraged by the firm’s proposal to partially compensate creditors with equity and tokens for a new venture.

“I accept responsibility for investments and risk, but Voyager leaders and Voyager Digital, LLC must accept responsibility for giving back in full what is due to us,” Dagnoli wrote in a letter filed with the court.

“Business is very good”

Like other customers who have become Celsius Network’s creditors and were interviewed by Yahoo Finance, some are calling for the removal of Celsius management given its statements prior to June 12, when the company stopped paying customers.

Celsius owes its customers $4.7 billion and faces a $1.2 billion gap between reported assets and outstanding liabilities, its recent bankruptcy filing showed. Earlier this month, the company floated repaying customers through its bitcoin mining subsidiary.

Robert Cominos, a Celsius customer for about a year who has transferred “around $250,000” to his platform, claims in his letter that interviews with the company’s co-founder and CEO, Alex Mashinsky, convinced him to make the move make.

“Business is going very well,” Mashinsky told a reporter on April 13.

“Celsius is a yield magnet, a magnet for people who want to save and earn income,” Mashinsky said said Yahoo Finance in June 2021. “We just surpassed 800,000 users and many, many of them are living on that income.”

LISBON, PORTUGAL - NOVEMBER 04, 2021: Alex Mashinsky, founder and CEO of Celsius, addresses the audience on the last day of Web Summit 2021 in Lisbon.  (Photo by Bruno de Carvalho/SOPA Images/LightRocket via Getty Images)

LISBON, PORTUGAL – NOVEMBER 04, 2021: Alex Mashinsky, founder and CEO of Celsius, addresses the audience on the last day of Web Summit 2021 in Lisbon. (Photo by Bruno de Carvalho/SOPA Images/LightRocket via Getty Images)

In another Celsius letter, an investor who has deposited six-figure life savings with the platform cited a Celsius Medium post published on June 7 that attempted to censure its alleged financial woes. In its post, Celsius claimed “a handful of haters” were spreading misinformation about the company.

“Celsius has the reserves (and more than enough ETH) to meet commitments as mandated by our comprehensive liquidity risk management framework,” the company stated.

Five days later, Celsius announced it would stop all customer withdrawals on the platform. A month later, the company announced that it had filed for bankruptcy.

Not everything, but not nothing

These personal stories will also “give judges a sense that the impact of these bankruptcies is far-reaching for many of these clients and is profoundly affecting their lives,” bankruptcy trustee Daniel Saval told Yahoo Finance.

From Saval’s point of view, whether and how these customers are cured is currently a difficult path for customers.

“I think it’s going to be a challenge,” Saval said. “These exchanges work by typically consolidating the contents of customer accounts. That means they don’t keep separate accounts. As a result, the likely outcome in these circumstances is that the property will be deemed the property of the bankruptcy estate and not the property of the customers themselves.”

In bankruptcy proceedings, secured creditors usually receive the first part of the money. Unsecured creditors are usually next on the list. But before claimants receive their claims, bankrupt companies must pay operating expenses and legal fees as part of the bankruptcy process.

“There is no blueprint in the bankruptcy code to decide what happens for customers in these circumstances. It’s all new,” Saval said.

“If [the customers] qualify as unsecured creditors, then theoretically they could be amalgamated with all other types of creditors. In theory, they could all be grouped together,” explains Saval.

Although both crypto lenders have proposed some form of repayment plan, a distribution plan is far from settled in either case, according to Adam Levitin, a professor at Georgetown School of Law and director of financial advisory for the Gordian Group.

Whether distributions are made in crypto assets or fiat currencies depends firstly on whether the companies liquidate their remaining crypto assets and secondly on the distribution plan, which the organized creditor committee approves by majority vote.

“I can say with almost absolute certainty that customers are getting nothing and not being paid in full,” Levitin told Yahoo Finance. He added that clients anticipating a withdrawal need to consider other factors such as crypto market volatility and inflation, as both processes could “take years to come.”

Earlier this month, Voyager responded to a joint proposal from FTX and Alameda Research that made an offer to purchase customer accounts. The offer argued it reduced risk for customers holding unsecured receivables with Voyager in exchange for FTX potentially acquiring those creditors as new customers.

The FTX logo displayed on a phone screen and a representation of the cryptocurrency can be seen in this illustrative photo taken on February 16, 2022 in Kraków, Poland.  (Photo illustration by Jakub Porzycki/NurPhoto via Getty Images)

(Photo illustration by Jakub Porzycki/NurPhoto via Getty Images)

In its response, Voyager claimed the bid makes “several false and misleading claims” about its business. “It’s a low-ball offer disguised as the White Knight’s rescue,” the legal document said.

Such a transaction could reduce risk for customers who hold unsecured receivables throughout complex insolvency proceedings. But, as Levitin pointed out, it won’t change whether customers see a full refund of their claims.

‘Curated BS’

Letters from Celsius and Voyager customers show users asking for their assets, although they reflect a clear uncertainty about whether they will ever see that money again.

“I regret now that I believed in it (see) their marketing strategy and possibly the loss of my family’s life savings,” Voyager customer Digant Goyal wrote in his letter to Judge Wiles.

Goyal’s view is shared by Daniel James Howley, who told the court: “Much of my lifetime fortune, amassed through some ups and downs as an entrepreneur, is tied to Voyager without saying if, when or how much I will.” win from it will buy again.”

“My savings to buy a home, raise and support a family, and invest in my future are all locked into this account,” he added.

Chapman Shallcross, a retired firefighter, held $244,000 in ETH and ADA at another crypto lender, BlockFi, before moving assets to Celsius Network “based on the overwhelming positive feedback,” he wrote in his letter. “And now I find that all of this information that I had gathered was curated BS.”

For Amanda Gan, a Celsius customer, the company’s bankruptcy and uncertainty surrounding her $167,000 in crypto assets have caused “significant hardship,” her letter reads.

“The loss of this sum of our savings will have irreparable consequences for our family,” she admitted.

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