Amidst the market-wide crypto crash seen in June, the massive cryptocurrency exchange Celcius Network filed for bankruptcy, costing millions of customers a total of $4.7 billion, according to the platform's bankruptcy filing. Tens of thousands of investors are now taking legal action against the massive cryptobank to try to get back some of what they lost.
At its peak, Celsius Network was managing more than $20 billion in cryptocurrency on its platform, with 1.7 million customers. While the assets it was managing had dropped below $11.8 billion by May of this year, the bankruptcy in June still impacted around 100,000 customers.
According to Celsius, the terms of use agreed to by customers stated that the ownership of all investments in the platform was transferred to the company at the time of investment. That would relieve it of the responsibility of reimbursing its customers.
However, a judge may still rule against Celsius by arguing that the platform was only storing the customers assets, meaning it would now be required to immediately return the assets, or what remains of them.
At least two groups of customers have retained legal representation to try to fight Celsius in court.
One of the groups is made up of roughly 58,000 investors in Celsius's "custody" accounts, accounts that were meant to safely store assets without collecting interest.The group plans to argue that custody account holders didn't give up ownership of their assets under the platform's terms of use, and that Celsius should now pay back the $180 million they had invested.
Custody account holders have a better chance at getting back some of their money, but they represent a tiny fraction of all the investors who lost money.
Hundreds of thousands letters have been sent to the Bankruptcy Court, written by investors describing losing half of their assets, their retirement fund, or their entire entire life savings to Celsius.
"That was our life savings," wrote one couple with $150,000 invested in Celsius. "It was our chance of having a baby."
Many customers have described feeling betrayed by a company that had made such grand promises, even up to within days of the bankruptcy filing. Co-founder and Celsius CEO Alex Mashinsky aggressively campaigned across the internet about what a tremendous opportunity Celsius was. The day before the filing, he was still fighting back against criticism of the platform on Twitter
"Do you know even one person who has a problem withdrawing from Celsius?" the Celsius executive wrote, responding to scepticism about the platform's future.
As late as ten days before the filing was reported, the Celsius website was still plastered with advertisements about its annual returns of nearly 18%. Countless customers admitted that they had been completely fooled by the platform's marketing, and many of those same people are now facing negative mental health effects.
The letters describe desperate people unable to make rent or support their families, with some saying they've even contemplated suicide.
"The thought of losing that amount of money is horrifying," wrote one investor. "If I do not get that back, I will end my life as the loss will impact my family and I significantly."
If you or someone you know is in crisis, reach out to the National Suicide Prevention Lifeline at 800-273-8255.
