Celsius resuscitation: Under the new plan, codenamed Kelvin, the lender would pivot to storing customers’ crypto in a special wallet and levying different charges for various transactions.
Facing employee skepticism, Mashinsky rhetorically asked the employees whether two companies that filed for bankruptcy, PepsiCo and Delta, prevented people from buying Pepsi or flying on Delta airlines. “Does it make the Pepsi taste less good?” Mashinsky quipped. “Do you not fly Delta because they filed for bankruptcy?” he added.
Celsius filed for bankruptcy protection in July 2022. This was roughly a month after pausing all withdrawals as the crypto market downturn took its toll on the company’s business model that offered eye-popping yields of 19% on crypto investments. While championing itself as helping the average Joe escape the clutches of Wall Street banks, investor documents revealed that the crypto lender bore far more risk than a bank. It made large loans with little collateral, making it difficult to honor mass customer withdrawals. It now owes customers $4.7 billion.
New plan will work, says Blonstein
Any decision to recast Celsius as a custodian rather than a lender would need to be approved by the New York bankruptcy judge overseeing the matter. The company has so far received permission to use its crypto mining facilities to generate revenue to help it meet customer withdrawal demands.
It has engaged a Committee of Unsecured Creditors via a legal representative to resume business. The committee is eager for Celsius to continue its operations but expressed doubt that the company could move forward with Mashinsky at the helm. The committee is also skeptical of the Kelvin plan.
But Blonstein is adamant that the Kelvin plan could work. “If the foundation of our business is custody, and our customers are electing to do things like stake somewhere or swap one asset for the other, or take a loan against an asset as collateral, we should have the ability to charge a commission,” he said at the meeting.
This plan would depart from the company’s original ethos of zero fees.
Blonstein also added that the company had an unusual plan to pay customers out without disclosing details. “If we are successful, it’s going to be a success story like the one that’s never been seen before,” he concluded.
Celsius plan elicits 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? Mashinsky’s top concern is probably staying out of jail I would think.” Silverman is co-authoring a book with former O.C. actor Ben McKenzie on crypto and fraud.
Another Twitter user, @ross_stalker, questioned the incentive to deposit funds into Celsius versus depositing the funds into a regular bank. Why would he pay a fee to hold crypto in a new type of secure crypto wallet described by the Celsius executives when he could keep money in a bank without being charged?
Celsius is awaiting the outcome of a bankruptcy hearing scheduled for October 6, 2022, where a ruling will be made on whether customers will be allowed to withdraw their crypto from the company’s “custody program” and “withhold accounts.”
The post Celsius CEO Floats Daring Plan to Resurrect the Floundering Company appeared first on BeInCrypto.