The cryptocurrency industry claims it wants to democratize traditional finance. The sector wants to be inclusive by developing financial services for all, regardless of social origin, ethnicity and geographic location. The goal: to reach as many people as possible and above all small investors.
This promise was successful after major cryptocurrency lenders, including Voyager Digital and Celsius Network, filed for Chapter 11 bankruptcy protection last month due to a liquidity crisis caused by the cryptocurrency market crash and the liquidation of the hedge fund Three Arrows Capital.
A number of cryptocurrency lenders, which operate like traditional banks and are also platforms where you can buy and sell coins like bitcoin, have suspended withdrawals. This means that their customers could no longer access their money.
And things have not improved for their clients after these platforms were declared under bankruptcy laws. According to official Voyager Digital documents, retail investor credits are considered unsecured, which means they are unsure of ever getting their money back.
“You may have no legal remedy or rights”
An almost similar language is found on the Celsius Network:
“In the event that Celsius goes bankrupt, goes into liquidation or is otherwise unable to repay its obligations, any eligible digital asset used in the earning service or as collateral under the loan service may not be recoverable and you may have no legal remedies or rights in relation to Celsius’ obligations to you other than your rights as a creditor of Celsius under any applicable law, “the platform stated in its terms and conditions.
“The funds in my Celsius holding account are not mine, they are the governments of the United States and all my business is protected and supported by these funds. If they are not returned, my business would fail, my 15 employees would be fired, and 14 years of my life’s work lost, ”a client wrote to the judge in the Celsius bankruptcy case, according to excerpts first published online by a Wikipedia editor.
“And at the age of 49, I would have to start over from scratch. The thought of losing this money left me depressed, suicidal and speechless. Please return our money.”
According to official documents, Celsius’ bankruptcy could cause its private clients – depositors and custodians – to lose nearly $ 5 billion. They could lose at least 70% of this money because the cryptocurrency industry is not supported by the Federal Deposit Insurance Corp. Cryptocurrencies are not legal tender and so far only have ground rules outlining what may and may not protect their value.
The return of WallStreetbets
The resistance did not take long to organize itself. Like the uprising in early 2021 that shook the stock market with the infamous GameStop (GME) short squeeze, which the video game retailer shares with the stratosphere, a movement to recoup some of the money from Voyager and Celsius customers recently broke out on the social media platform Reddit.
These Reddit traders, like Reddit WallStreetbets, use more or less the same tool – the community – that was implemented just over a year ago to push the finance barons.
They copy the basic movement technique of using class action to force Celsius and Voyager to take care of their retail creditors.
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They have thus set up discussion channels on Reddit and Telegram, where they exchange and dissect the financial documents of companies. And they organize social media forums.
“I do not understand why [Alex] Mashinsky is not in prison. Is the United States a joke? This is literally a scam, it’s not a bankrupt company, “complained a Reddit user on the Celsius bankruptcy forums.
Mashinsky is the CEO of Celsius.
On the r / celsiusinsolvency channel on Reddit, users are asking Celsius customers to pressure regulators to open an investigation into the lender. All research and documentation work has been done. Users just need to click on the links provided to them to write their complaints.
“Together, we can keep Alex [Mashinsky] responsible and striving for a better result especially for smaller investors, who have been lied to and misled, “the lead post said.
Pressure on the SEC
The channels also promote communities on Telegram and Twitter where damaged customers can find help, organize and exchange ideas. The uncredited Earn Discount Celsius group account on Telegram at the last check had more than 1,800 members.
One of the dominant ideas here is lobbying the US Securities and Exchange Commission to probe Celsius.
“We need both a positive message ‘please help’ and maybe ‘appoint a recipient to minimize our recovery’ and a negative one ‘fines hurt us and retail needs your help’, but it went further the point of staying silent, “suggests a member under the name” MannyMane “on August 22.
“If the SEC gets involved, it could appoint a trustee whose job is to hunt down the assets, collect them, and then distribute them to the victims,” replies another member. “A curator can also prosecute third parties who have been unfairly enriched.”
“It appears this is not only the best option, but the only one,” adds one member. “At this point I think we need to make them aware that we know they CAN do it, hence the pressure to do it.”
On Twitter, the “spaces”, or Q&A, with the prominent bankruptcy lawyer Thomas Braziel are organized and very popular.
“Voyager and Celsius – I love all the core credit activity – for me it’s great to see – it’s like the WSB has arrived on Bk – Telegram / Reddit / Twitter Spaces channels – it’s amazing to see,” he recently tweeted Braziel, referring to the WallStreetBets Reddit Channel.