The new plan would see the company become a custodian of crypto assets with a fee structure for different transactions.
Under the new plan, codenamed Kelvin, the lender would move to storing customers’ cryptocurrencies in a special wallet and charging different fees for various transactions.
To employee skepticism, Mashinsky rhetorically asked employees if two companies that went bankrupt, PepsiCo and Delta, were preventing people from buying Pepsi or flying on Delta airlines. “Does it make Pepsi taste less good?” Mashinsky joked. “You don’t fly Delta because they went bankrupt?” he added.
Celsius revival
Celsius filed for bankruptcy in July 2022. This was about a month after pausing all withdrawals as the cryptocurrency market downturn affected the company’s business model which offered astonishing 19% returns on cryptocurrency investments.
While defending himself as helping the average Joe escape the clutches of Wall Street banks, investor documents revealed that the cryptocurrency lender was much more at risk than a bank. It made large loans with little collateral, making it difficult to meet massive customer withdrawals. Now he owes clients $4.7 billion.
New Plan Will Work, Says Blonstein
Any decision to recast Celsius as a custodian rather than a lender would have to be approved by the New York bankruptcy judge overseeing the matter. So far, the company has received permission to use its crypto mining facilities to generate revenue to help it meet customer withdrawal demands.
It has hired an Unsecured Creditors Committee through a legal representative to resume business. The committee is keen for Celsius to continue operations, but expressed doubt the company could go ahead with Mashinsky at the helm. The committee is also skeptical of the Kelvin plan.
But Oren Blonstein, Celsius Chief Innovation Officer and Chief Compliance Officer, insists that the Kelvin plan could work. “If the core of our business is custody, and our clients choose to do things like gamble somewhere or trade one asset for another, or take a loan against an asset as collateral, we should have the ability to charge a fee.” he said at the meeting.
This plan would depart from the original spirit of the zero-fee company. Blonstein also added that the company had an unusual plan to pay customers without disclosing details. “If we are successful, it will be a success story the likes of which has never been seen before,” he concluded.
Celsius Plan Draws Ridicule from Crypto Twitter
The new plan has drawn criticism on crypto Twitter, with journalist Jacob Silverman posing the rhetorical question: “Why would anyone trust a reanimated Celsius as a custodian? I think Mashinsky’s main concern is probably staying out of jail.” Silverman is the co-author of a book with former OC actor Ben McKenzie on crypto and fraud.
Another Twitter user, @ross_stalker, questioned the incentive to deposit funds in Celsius instead of depositing the funds in a regular bank. “Why would you pay a fee to hold crypto in a new type of secure crypto wallet described by executives at Celsius when you could store money in a bank without being charged?”
Celsius is awaiting the outcome of a bankruptcy hearing scheduled for October 6, 2022, where it will be decided whether customers will be able to withdraw their crypto from the company’s “escrow program” and “hold accounts.”
By Audy Castaneda
