Celsius has a Hail Mary bankruptcy plan: Turn its debt into a new cryptocurrency
Since bankrupt crypto lender Celsius froze withdrawals in June, customers’ funds have been in limbo. Now, leaked audio shared with CNBC reveals a preliminary plan to compensate them.
The company wants to issue an “IOU” cryptocurrency to customers that signed up for some of its accounts.
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The recording was provided by Tiffany Fong, who says she is one of the 500,000 Celsius customers with funds locked in the platform. Fong says she received the audio from a self-identified employee, who stayed anonymous during their communications.
CNBC was not able to verify that the leaked audio is the entire exchange from an internal meeting on Sept. 1. However, CNBC spoke with former employees who verified that the recording is authentic. In the audio, Chief Technology Officer Guillermo Bodnar says the plan is in “early stages.” What’s laid out may have changed in the weeks since the call.
In the recording, Celsius co-founder Nuke Goldstein outlines a compensation plan for customers who deposited assets in Celsius’ “Earn” account, for which Celsius had promised yields as high as 17%.
Goldstein said Celsius will release “wrapped tokens,” which will serve as an IOU for customers. The tokens represent the ratio between what Celsius owes customers and what assets they have available. He said if customers wait to redeem their tokens, there’s a better chance that the gap between what Celsius has and what it owes will be smaller.
That’s a risky wager on an increase in value for a nascent token from a company that’s just been through bankruptcy. Goldstein said the value is likely to go up because Celsius has revenue coming from its mining business, staked ETH and other coins that may become liquid.
Celsius also intends to allow customers to redeem these tokens, according to Goldstein. He said the tokens can be redeemed on Celsius for a value likely less than what they are owed or on crypto platforms like Uniswap, allowing the market to determine the tokens’ value.
The reimbursement isn’t the only plan Celsius has in the works. In a portion of the recording shared exclusively with CNBC, Bodnar said the company is also building a transaction management system, which is designed to track the company’s blockchain assets. That would include the assets, the price at which they were purchased and how much they were worth when they sold.
Celsius, which said it managed billions of dollars in customer assets, never had sophisticated software to properly manage and track its assets, according to sources familiar with the company. These sources, who asked not to be named because of confidentiality restraints, also said the data was being tracked manually, on a simple Excel spreadsheet.
On the call, Bodnar said the goal for building out this new system is transparency.
“…[T]ransparency reflected not just in how we communicate, but making sure that everything that is done within our platform is traceable, is auditable, end to end – we don’t have anything to hide,” he said.
Goldstein also emphasized that there was a lot of disinformation about the company circulating on Twitter and that employees should only rely on information provided in court documents and the town halls run by the CEO Alex Mashinsky.
“If you go to Twitter, bring an umbrella because it’s raining bull—- over there,” Goldstein said. “This is your opportunity to get the truth. If we don’t tell you the truth of what we know – we go to jail. Now, I don’t know if we go to jail…but it’s not good.”
In the Q&A portion of the event, one questioner asked where employees stood in terms of getting their locked funds released from the platform. Goldstein said employees will not be prioritized over customers.
“The employees are not last or first,” Goldstein said. “You are a customer as well. We are a customer. That means that we are at the same level of the customers.”
CNBC reached out to Celsius for comment about their reimbursement plan and the status of their transaction management system, but the company hasn’t responded.
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