Stolen directly from the recent headlining Johnny Depp vs. Amber Heard defamation case, “HEARSAY,” appears to be rearing it’s ugly head in the growing case of the struggling Celsius Network.
- Lawyers hired by crypto lender Celsius are advocating for Chapter 11 bankruptcy, according to people with knowledge of the situation.
- But executives at the firm believe many of its clients would prefer Celsius to avoid lengthy and painful bankruptcy proceedings.
The embattled crypto lending platform Celsius has kept withdrawals and transfers frozen since June 12 and told the Celsius Network community that the “process will take time.” Since then, Celsius users are wondering why they are still receiving weekly rewards, and reportedly the company’s management has been arguing with its lawyers over whether or not the business should file for Chapter 11 bankruptcy.
Celsius Network is resisting a recommendation from its own lawyers to file for Chapter 11 bankruptcy — and seeking a show of support from users to help win the internal argument against the suits.
With the company’s management prevented from making any public pronouncements due to legal advice, Celsius believes many of its retail clients would prefer the firm to avoid bankruptcy, according to people with knowledge of the situation. To that end, users can show their support by engaging “HODL Mode” in their Celsius account, said the people.
However, most of the Celsius articles these days are quoting ‘people familiar with the matter,’ and ultimately these sources cannot be verified.
Celsius Customer Says It Is ‘Insulting’ That the Lending Company is Still Paying Weekly Rewards
16 days ago, the crypto lending platform Celsius told customers that it was pausing swaps, transfers, and withdrawals and did not refer to a time when the company would reinstate the services. Since then, it has been assumed that Celsius is suffering from a financial hardship and possible insolvency.
Last week it was reported by the Wall Street Journal (WSJ) that the company was seeking restructuring advice from the advisory firm Alvarez & Marsal. Another report that followed claimed that Goldman Sachs was allegedly looking to buy distressed assets from the firm “at potentially big discounts in the event of a bankruptcy filing.”
Furthermore, on June 27, Bnktothefuture CEO Simon Dixon wrote about still getting his weekly rewards from the company, despite the frozen withdrawals. “Email on one of my accounts,” Dixon wrote. “Can’t withdraw but Celsius Network [is] still paying out. I’m curious if you think the rewards should still be coming? Thoughts?” Dixon added.
Some members of the crypto community called the dispersal of weekly rewards offensive. “This is honestly insulting, Celsius Network is still paying weekly rewards while holding my crypto hostage,” an individual tweeted on Monday.
Meanwhile, some users asked if there were any onchain activities stemming from the Celsius Network or whether or not capital has been moved. “Is anyone still keeping up with Celsius Network’s onchain activities of their funds? If they still paying down their loan/moving capital etc…,” one person wrote on Twitter.
Another person mentioned it was likely a legal chess move by Celsius’s management. “They’re likely still “paying” rewards because if they stop, they violate their terms of service (contract) and then have no lawful reason to hold your funds in earn any longer,” the individual tweeted on Monday.
Sources Say Celsius Is Arguing With Lawyers About Filing for Chapter 11 Bankruptcy — Most Celsius Articles Over the Last Week Quote ‘People With Knowledge of the Situation’
On the same day, a report from the theblock.co’s reporter Andrew Rummer says that Celsius’s lawyers want the company to file for Chapter 11 bankruptcy. Rummer’s report notes that the company has been against the proposition to file Chapter 11, which is one of the most expensive routes of bankruptcy available.
The reporter’s source stems from “people with knowledge of the situation,” and this has been an ongoing trend as far as Celsius news is concerned. Many reports from publications like theblock.co, WSJ, Bloomberg, and others covering the Celsius Network subject have quoted people familiar with the matter.
For instance, the WSJ claimed people familiar with the matter said that Celsius was working with the restructuring law firm Akin Gump Strauss Hauer & Feld LLP. However, not too long after that report, the WSJ quoted individuals with knowledge of the situation again and noted that Celsius was seeking advice from the restructuring advisory firm Alvarez & Marsal.
It was the theblock.co that wrote about Celsius looking for help from the financial giant Citigroup when The Block author, Yogita Khatri, quoted two sources “familiar with the matter.” Moreover, it was the crypto publication Coindesk that reported on Goldman Sachs looking to buy distressed assets from Celsius. That information derived from “two people familiar with the matter,” according to Coindesk author Tracy Wang.
The Block’s Rummer said his sources claim that Celsius has been “prevented from making any public pronouncements due to legal advice.” The sources claimed that Celsius Network users would prefer an alternative to bankruptcy proceedings.
“To that end, users can show their support by engaging ‘HODL Mode‘ in their Celsius account, said the people,” Rummer wrote on Monday. With all the anonymous sources, people with knowledge of the situation, and those familiar with the matter, it is hard to find accurate information on what Celsius is actually doing to fix its issues.
People are likely inclined to wait for Celsius’s official statements as most everything else has been hearsay and speculation. Yet there is no certainty on when Celsius will respond to the issues customers are facing and until then, they have to rely on so-called individuals with knowledge of the situation.
CEO Alex Mashinsky
Being advised to refrain from public statements puts Celsius in a novel situation. The firm’s CEO, Alex Mashinsky, has for years held a regular “ask me anything” event on Fridays to field questions from clients and holders of Celsius’s native CEL token.
Mashinsky is currently in the US and is unable to comment on his firm’s woes due to legal advice, according to the people.
Chapter 11 of the US Bankruptcy Code allows a company to continue operating while it works out its debts. The firm proposes a plan of reorganization for creditors to approve, overseen by a team of lawyers.
If Celsius enters bankruptcy protection, client positions will be sold into US dollars at the current market price and clients will be added to the list of the firm’s creditors — to join the line for whatever value can be salvaged.
Celsius believes that avoiding bankruptcy will result in more value for account holders as it should give the firm move time to unwind trades that are stuck in illiquid positions, according to the people.
Untangling bankruptcy proceedings can prove both painful and time-consuming. After Tokyo-based crypto exchange Mt. Gox was hacked in early 2014, it took nearly eight years for the legal process to conclude.
If Celsius is eventually forced to file for Chapter 11, it’s yet to be decided which legal entity would make the petition, according to one of the people.
Despite the news of potential bankruptcy, Celsius’s CEL token has climbed over the past two weeks. After plunging from about $0.44 to $0.15 as the original news of halted withdrawal broke, the token has since rebounded to $0.74, according to Coingecko data.
Image Credits: Shutterstock, Pixabay, Wiki Commons
–Via: Celsius Stories Littered With ‘People Familiar With the Matter’ Sources, Report Claims Lender Struggles With Arguments Over Bankruptcy
–Via: Celsius seeks show of client support as lawyers push for Chapter 11 bankruptcy
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