Celsius crypto collapse debtors make personal pleas for help

Every now and then while writing this newsletter, I stop to marvel at the sheer quantity of money circulating through tech companies. We’re often talking about acquisitions, quarterly earnings and market caps in the billions of dollars.

The sheer scale of those numbers makes it easy to forget that everyday people, through their routine investments and regular purchases, power this enormous economic ecosystem. Your neighbors might not toss around cash like Elon Musk or Warren Buffett, but their holdings are no less personal.

We need a periodic reminder of that reality—and the casualties of the Celsius Network collapse are providing one.

Over the past several weeks, the tech and cryptocurrency industries have gawked at the demise of Celsius, a high-profile crypto lender that filed for bankruptcy in mid-July. The crash followed a steep, inflation-driven drop in crypto prices, which exposed Celsius’ strategy of borrowing funds and making risky bets that depended on crypto values continuing to climb.

Celsius’ debtors include institutional entities in the crypto space, but the vast majority of its 1.7 million users are retail investors who banked on huge returns pledged by the company’s leadership. While there’s certainly an element of caveat emptor to their losses, many earnestly believed Celsius CEO Alex Mashinsky when he repeatedly touted the company’s underlying strength and promised the private company had enough reserves to meet its obligations. 

More than 100 of those ordinary investors have now written to a federal judge in New York overseeing Celsius’ bankruptcy proceedings. Their powerful letters offer a window into the collateral damage caused by reckless entrepreneurs in a largely unregulated market. They describe the pain, shame, and heartache of believing Celsius’ false optimism. Many take responsibility for their misguided decisions, though virtually all seethe with anger at the lender’s leadership. 

A sampling of their letters follows:

Thomas Bull, of Australia, who “had 95% of my life savings in Celsius”: “I have suicidal thoughts and the only reason I hadn’t already taken my life was the burden that would leave my family. And I have lost 15% of my body weight in 6 weeks from the stress of suddenly losing everything that I’ve spent my entire life building. Worst of all, my mother split my home with me, so if I default on the home, she’ll be homeless at 60 years of age with no other savings. Her rock bottom to a place with no way out will be on my hands, and I just don’t see a way where I can recover.”

Dalena, last name and location not provided: “Unfortunately I have all of my life savings held on the Celsius platform. My family trusted me to store their Bitcoin on my Celsius account as well. However, we did not expect to be blindsided. This was a lot of money that we were going to use as leverage for a better life—not having to live paycheck to paycheck, not having to worry about rent due, being able to pay off our debt and college tuition. It may not seem like a lot to the majority of people, but two years of our savings and investments have been robbed from us. For a low/middle class family, this whole situation is very daunting and extremely stressful.”

Merilou Athens-Barnekow, who had about $50,000 tied to Celsius: “I am a small depositor—an 84-year-old widow on Social Security. The deposit was my life savings to pay for home care when I’m no longer able to care for myself. I don’t have years to wait for my saving to be returned. I made this decision after I watched the terrible care my husband received in a rehab hospital that was also a nursing home.”

Gregory, last name and location not provided: “I’m 71 years old, retired, and have money in the low six figures tied up in Celsius. Since I’m retired, I’ll never have an opportunity to replace those funds. I don’t know if I’ll ever get any of my deposits back, but I am lucky in that regard. I won’t starve and will still have a place to live. The money, foolishly, was for my heirs. I can’t bring myself to let them know that I have lost their money, even though they didn’t know it was housed in Celsius. In the end, I can only blame myself.”

It’s unrealistic to expect that policymakers will root out all hucksters and hacks in the still-infant crypto and decentralized finance spaces. But as members of Congress and federal bureaucrats weigh additional guardrails—yet another regulatory proposal arrived Wednesday—the voices of Celsius’ common debtors should ring in their ears.

The Celsius victims’ losses might not have been in the billions, but they might as well have been to them.

Want to send thoughts or suggestions for Data Sheet? Drop me a line here.

Jacob Carpenter

NEWSWORTHY

A cloudy future. Electric automaker Lucid on Thursday cut its 2022 vehicle production forecast for the second time this year, citing supply chain and logistics issues that continue to plague the EV upstart. Lucid officials said they now expect to produce 6,000 to 7,000 of the company’s luxury sedans in 2022, down from a 20,000-vehicle target set early this year. Lucid shares tumbled 10% in mid-day trading Thursday and are now down 55% year-to-date.

A power lunch play. House Speaker Nancy Pelosi dined Wednesday with the two top executives of Taiwan Semiconductor Manufacturing Company during her controversial 19-hour visit to the Asian island, The Washington Post reported. Pelosi used the meeting to reinforce the importance of TSMC, which manufactures about 90% of the world’s most advanced chips, and tout the benefits of $52 billion in federal subsidies set to flow to the semiconductor industry. Taiwanese President Tsai Ing-wen said the two sides “exchanged views on the deepening of cooperation between Taiwan and the United States in various fields.”

Closing up shop. Facebook plans to end its livestream video shopping platform in October, the latest retreat by a tech company away from the feature, TechCrunch reported Wednesday. The Meta unit encouraged creators and online sellers to shift to sister site Instagram, which still carries a live shopping platform, or Facebook’s short-form video feature known as Reels. The decision comes one month after The Financial Times reported that TikTok planned to scale back its live e-commerce ambitions in the U.S. and Europe due to underwhelming audience response.

Pointing the finger. Solana blockchain developers believe a software issue with the closed-source wallet Slope is responsible for an ongoing hack hitting thousands of cryptocurrency holders, CoinDesk reported Wednesday. Thieves have drained several millions of dollars from roughly 9,000 wallets linked to the Solana ecosystem, though the nonprofit behind the Solana network says it suspects the issue lies with hot wallet providers. About 25 million wallets exist on the Solana blockchain.

FOOD FOR THOUGHT

Still in the game? Michael Saylor, perhaps the biggest Bitcoin bull of them all, has wandered out to pasture as CEO of his analytics and software company, MicroStrategy. But as Fortune’s Shawn Tully reported Wednesday, the outspoken entrepreneur hasn’t soured on his signature crypto investment, which includes betting his entire company’s future on the growth of Bitcoin’s value. With Saylor staying on as MicroStrategy’s executive chairman, pledging to focus on “our Bitcoin acquisition strategy and related Bitcoin advocacy initiatives,” company observers wonder whether his resignation truly signals a shift at the company he co-founded more than three decades ago.

From the article:

In a surreal twist, though the company announced (Wednesday) a gigantic writedown of $918 million on its Bitcoin holdings, MicroStrategy’s stock soared the day after the news hit, rising 15% to $321 and gaining over $400 million in market cap.

The jump deepens the mysterious mythology of Michael Saylor. Did Wall Street cheer because the bedrock software business will fare far better when Saylor, distracted by Bitcoin, isn’t running things day-to-day? Or does having him as a full-time crypto evangelist actually lift Bitcoin’s prospects and hence brighten MicroStrategy’s future?

IN CASE YOU MISSED IT

Facebook’s unlikely new public face: How Nick Clegg went from political wipeout in London to Mark Zuckerberg’s inner circle at Meta, by Jeremy Kahn

China’s tech crackdown, a national security law, and an expat exodus have pummeled Hong Kong. Can this CEO save the city?, by Clay Chandler

Crypto exchange Binance taps its 36-year-old billionaire cofounder He Yi to lead its $7.5 billion venture capital division, by Nicholas Gordon

Billionaire Sam Bankman-Fried thinks Solana is the ‘most underrated’ token, hiccups and all, by Taylor Locke

Time for Solana to be more like Bitcoin, by Jeff John Roberts

Tesla and Pfizer are among the world’s 20 fastest-growing big companies, by Paige McGlauflin

Is the space tech bubble bursting? That’s the wrong way to think about it, by Thomas D’Halluin

BEFORE YOU GO

A virtual miracle. Modern medicine and virtual reality recently teamed for an incredible accomplishment in Brazil. The Washington Post reported Wednesday on the remarkable effort this summer to separate cranially conjoined 3-year-old twins, Arthur and Bernardo Lima, who became the oldest known pair to successfully undergo the complex procedure. The Rio de Janeiro-based medical team used VR technology to practice for the grueling series of seven surgeries, allowing them to virtually train alongside renowned experts in the U.K. Doctors said Arthur and Bernardo are on the road to recovery, though they’ll remain in the hospital for about six months. 

This article originally appeared on https://fortune.com/2022/08/04/celsius-crypto-collapse-debtors-regulation-bankruptcy-letters/