BnkToTheFuture co-founder Simon Dixon has proposed a recovery plan similar to the solution offered to Bitfinex after its August 2016 bitcoin hack.
Celsius’s lead investor, BnkToTheFuture, and its co-founder, Simon Dixon, have offered to help the network by deploying a “financial innovation” similar to the one used in 2016 to save cryptocurrency exchange Bitfinex from liquidation.
Although Dixon’s statement on Saturday did not include specific details of the recovery plan offered to Celsius’s board of directors and CEO Alex Mashinsky, Dixon said it would be similar to the one offered to Bitfinex following its hack in August 2016, which he said was solved in nine months:
“I think traditional finance will not have a timely solution for Celsius as we have seen in the past with Mt. Gox, which is still unsolved 10 years later. I think this can only be solved with a solution using financial innovation like we did with Bitfinex, which was solved in 9 months and worked very well for depositors,” he claimed.
Dixon noted that as a Celsius shareholder and lender, and due to the “short-term systemic impact on those who own bitcoin,” he was “eager to support Celsius with a turnaround plan.”
“My position is to offer solutions, as we have the experience, the licenses, and the technology to do so,” he said.
Dixon’s plans for Celsius are inspired by his company’s solutions in August 2016, after Bitfinex announced that it had lost approximately 120,000 Bitcoin (BTC) in a cybersecurity breach, resulting in a loss of about $72 million client funds at that time.
Instead of initiating liquidation proceedings, Bitfinex came up with an innovative recovery plan, which included “refund promises” in the form of BFX tokens for customers, representing the value of money lost in the attack.
These tokens were tradable on the open market or could be held later for a future $1 per token refund, allowing customers to speculate on the company’s recovery.
Around seven months later, BnkToTheFuture reported that the scheme had worked, with victims having recovered between 75% and 100% of their funds through the various measures available:
“In 2016, Bitfinex needed a plan to recover from their hack and the company I co-founded, BnkToTheFuture.com, supported them and executed a recovery that included security, debt, and equity tokens and gave investors a very high return for the high risk they took.”
Dixon did not confirm whether his recovery plan would work the same way with a token; he only said that it would be solved using similar innovative methods.
A Gamestop-Style Short-squeeze is coming up
At the end of the month, BnkToTheFuture joined the solution by working with Bitfinex to allow clients to convert their BFX tokens into company capital.
However, there is also an unofficial community-led recovery plan that appears to be gaining traction on Twitter under the hashtag #CELShortSqueeze.
The move attempts to force this token short sellers to cover their short positions by purposely driving up the price of Celsius token (CEL) by massively buying and withdrawing from various exchanges.
Short selling is an investment strategy in which an investor borrows shares and sells them immediately with the aim of buying them back later at a lower price and pocketing the difference. It allows the investor to benefit from the fall of a stock or an asset.
Short-squeeze occurs when a shorted asset rises in value, forcing short sellers to repurchase the stock they initially sold to prevent their losses from mounting. However, buying back shares when the price is rising can cause more price moves to the upside, which can further squeeze short sellers.
The same strategy was initiated by users of the subreddit r/wallstreetbets in January 2021, which saw stocks of the American video game retailer reach highs of almost $500 per share, around 25 times the valuation at the beginning of the month.
The platform said it aims to maintain an open dialogue with regulators and officials and will continue to find a resolution. Meanwhile, the platform will be pausing its Twitter Spaces and Ask-Me-Anythings (AMAs).
By Audy Castaneda