Topic: Recent events should make you withdraw all your coins to your own wallet: Part 2 - page 2. (Read 1644 times)

That's a good point - I'm not sure what's worse. That they handed out loans without any idea what they were going to be used for, or they handed out loans knowing they were going to be used to gamble on pictures of apes with funny hats.

Ok, here's the same statement which was last edited just a few months ago and is still being displayed on their website: https://support.celsius.network/hc/en-us/articles/360002174718-Does-Celsius-have-an-insurance-policy-

I don't think I can argue with you on this one, at least in principle. Celsius may or may not have known the purpose of the loan, but it seems that if they did know the purpose, they had very lax standards.

Forum lenders don't take deposits, which I am aware of, and anyone trying to take deposits would likely quickly be labeled a scammer.

They made that statement in 2019, and it is possible that their business model had subsequently changed. I am not sure how much demand there is for fully collateralized crypto loans. It is also possible that greed got the better of whoever made (and approved) the decision to make these risky loans, as I would think if they turned out better, they would have made Celsius a lot of money.

Doesn't absolve people of the responsibility to do a basic amount of research in to where they are sending their money. Every service or product in existence advertises themselves positively, as does every scam in existence.

Based on thorough risk assessments, credit scores, income analysis, and so on. It seems very much like Celsius were handing out loans to any large entity which wanted one without really any due diligence on how that loan was to be repaid or what it was to be used for.

Yes, but these users have very strict limits as to what they will lend without collateral. They certainly aren't risking amounts sufficient to put them out of business should their customer default.

Mine is. While they claimed all loans were collateralized by at least 150%, we know now that this was not the case.

I noted before that the hypothecation of collateral increases risk to Celsius, although it does not mean that a loan 50% secured by collateral is now entirely unsecured, it means that Celsius has increased their leverage.

Banks make unsecured loans all the time without issue, as I noted before, credit card debt is generally unsecured, and is so profitable for banks that they have resorted to giving customers rewards for using their credit cards. There are a few forum members who have made a business out of lending, sometimes without collateral. I am sure that some of these loans have gone bad, but I believe their business is overall profitable, net of losses.

My issue is not with Celsius making unsecured loans, my issue is with the purpose of the loans, and the (what I believe) lack of documenting borrowers' ability to repay the loans.  Making a loan to a business for the purpose of buying speculating on NFTs is basically the same as giving someone a loan for gambling. Gambling loans are very risky (for obvious reasons), and anyone who borrows for this purpose needs to have the ability to repay said loan via other reliable sources of income. I can't imagine how Celsius could have documented 3AC's ability to repay their loan via some way other than their NFT bets being successful.

No, obviously not, but to complain that Celsius did with your coins exactly what they said they were going to do with your coins is just downright stupid. Nobody reads the Terms of Service for buying a video game online, sure, but you would expect if you are going to be depositing several bitcoin (or an equivalent amount of value in fiat/altcoins) to any platform then you might spend a couple of minutes reading about that platform.

Do you really think people read ToS? Using website to estimate reading time on average reading speed[1], Celsius ToS has 15193 words which could took 116.9 minutes to read whole thing. Prank by GameStation on April Fool[2] also prove almost 90% people didn't found out questionable part of ToS.

[1] https://wordstotime.com/
[2] https://www.cnet.com/culture/online-game-shoppers-duped-into-selling-souls/

The fact that as we discussed previously they handed out billions of dollars loans which were only 50% collateralized, and then went on to spend that collateral, leaving them with fully uncollateralized loans, means we can absolutely say that Celsius did not have good risk management.

I'm now seeing people complaining on Reddit and Twitter about what Celsius have said in their bankruptcy filings, as highlighted in this article: https://gizmodo.com/celsius-bankrupt-billion-money-crypto-bitcoin-price-cel-1849181797

It's only a bit shocking now? Was it not a bit shocking when you read in it in their Terms of Service before you deposited your coins? You did read their Terms of Service, right?

Celsius, and other lending platforms operate essentially the same way that banks operate -- that is they borrow money from depositors, and lend money out, and pocket the difference between what they pay in interest, and what they receive in interest via loan payments (less loan losses). If a platform can sufficiently manage risk, including not making risky loans, (and matching loan maturities with when they need to repay their lenders/deposit holders), they have a solid business model.

This is an example (if true) of Celsius throwing all risk out of the window.

It is not uncommon for banks to successfully lend without collateral, for example, most credit cards are unsecured loans, and credit cards are so profitable for banks that they often pay customers to use them (via new account bonuses and rewards). Banks also often lend to businesses successfully, although the underwriting process is often more complex. If Celsius really made a loan to a 3AC to buy NFTs, I think it is fair to say that the underwriting process was too complex for Celsius.

The saddest thing about this whole affair is this quote from Mashinsky, the CEO:
This should be the end of Celsius, and really, of all centralized lending platforms. They have proven without a doubt that they cannot be trusted, that they are not responsible, and that they made investments which were far too risky all in the name of making themselves profits while making their customers bear all the risk and all the fallout. Nobody in their right mind should have any coins on any of these platforms, and nobody in their right mind should ever use these platforms again. But no doubt in a few months or a year or so, all this will be forgotten and Celsius 2.0 will be back promising 20% interest (but it's definitely safe this time ), and a whole bunch of greedy users and newbies will flock right back to them. And the coins of all these users will be used to pay off all their outstanding debts from now.

I also stumbled across this Reddit post which is equal parts hilarious and sad: https://www.reddit.com/r/CryptoCurrency/comments/vy84rw/3ac_borrowed_millions_from_voyagerblockfi_user/

The summary is the under- or non-collateralized loans which firms like Celsius and Voyager were giving out to 3AC were being used to buy utterly worthless NFTs. Imaging losing all your money on Celsius because it was sent to 3AC and used to buy a jpeg of DickButt.

Yeah, seems like I was completely wrong and it took only 1 day to find out, I've just stumbled upon Tryninja's post on the other topic.

So, my positivity is done for, seems like they weren't stupid but a bit cunning in doing this, the only thing that doesn't change is that the whole thing got recked.

Also,another thing:

I'm going to stop talking about any sort of stuff, NFT, Defi, shitcoins, mining, with any of my friends and relatives, they want to talk about BTC, good, we talk they want to talk about some other investments I'm going "La la la" and I don't want to hear anything.
I've just done a tour of the chat logs on a private channel, and some other WhatsApp discussions, and seriously, I don't recognize some of them anymore, either they are on 101% hopium or they've gone full gambling addicts. I have a feeling some of them think I'm just telling them about the problems and risks just so I'm the only one "investing" and getting rich behind their backs.

A bear season is no problem for me, I don't care that much about the daily price, but what this market and the crash are doing do some individuals is really frightening.

The reports I've read said that they had $18 billion in assets at their peak.

Absolutely not. Their crypto assets will either be liquidated to pay off secured creditors or will be bought on the cheap by whoever bails them out or buys up the scraps that remain. Users will be lucky to get back anything at all, although I can also see them restructuring, consolidating their debts in to some new "VoyagerDefinitelyNotAScamToken", and then paying off their users with this useless trash.

I don't see why they wouldn't. Like all centralized platforms, standard users are being treated as unsecured creditors. In the event of bankruptcy or other liquidity crisis, their money is the first to be used and the last to be returned.

On the other thread, I was saying that those companies who don't care about security, risks, or anything else are going by the saying of getting rich or die trying, but these two (?) are really pushing it to the extreme. To me is quite funny when guys who were all suited up, conferences everywhere, full bling-bling are trying to scram and get into hiding forgetting somehow they were no master criminals in the first place and that there are people who lost millions hunting them.

And speaking of millions in a 10 billion case, how much money did 3AC actually had in the first place?
I always kept getting news about how they were frantically trying to get rid of expensive NFT they've bought for millions, and one the pictures in those replies really got me, despite being really poorly done.


There is a hard lesson to be learned here, nothing will go up forever and a clone of a thing will not just gain value as the original and keep it just because you think the 200 000 people that are following you on Twitter will keep pouring money in it. You need real money for this growth, not money from uncollateralized loans or one done with a bunch of over-estimated digital jpgs, when that money flow is cut downs goes the sand castle, it happens every single time with every industry or every scheme, just because it's crypto it doesn't mean its invulnerable.


So Gox style, but unlike Gox I don't think there will be a magical tux finding of an address with a few hundred thousand bitcoin.


Yeah, Celsius said it had resolved its liquidity problems, they're getting some money from somewhere to pay back their loans but still crickets about the money that is stuck there. But in this case, I'm a bit more positive, I don't think they are that stupid to pay their loans with the money people have on their platform.
If they do this and then file for bankruptcy they are done for

Most recent updates:

• Crypto.com have cut interest rates again
• Vauld say they are $70 million in debt
• The founders of 3AC are on the run and cannot be found to be served court summonings
• Voyager have said that customers will probably get their USD back since it is held with a fiat bank (the irony of fiat banks coming to rescue), but crypto will be allocated on an as-of-yet unclear "pro rata" basis (so expect to get very little of it back)
• Still no news from Celsius about customers ever getting back their money

The rehypothecation practice is particularly troubling to me, probably more so than the making under collateralized loans. The rehypothecation adds an additional layer of risk that they will be unable to cover withdrawals as they are requested by deposit holders, and borrowers as they pay off their loans.

Starting to delay withdrawal requests is an indication that they lack funds to cover withdrawals, but maintaining a long-standing practice of not immediately processing withdrawals until the following business day does not indicate that, as long as the delay is not increasing. They have a cutoff time, and as long as all withdrawals requested prior to the cutoff time are processed according to their schedule, all else being equal, I would not think they are having liquidity problems.

I've been speaking in generalities about all these shady platforms throughout this thread, but here is some info for Celsius:

Or a business not actually having access to the funds they need to cover customer withdrawals.

The post you were replying to was specifically about Celcus. I am really not familiar with Voyager.


Ultimately, it is up to the users of a business to properly review and understand the terms they are agreeing to prior to doing business with said business.

I don't think the lack of ~instant withdrawals is necessarily an indication that funds are not safe. It is likely more of an indication of the business not using a hot wallet, or using a smaller hot wallet.

You can see from Voyager's accounts which I linked to earlier in this thread: https://www.newswire.ca/news-releases/voyager-digital-provides-market-update-851734302.html

Crypto assets loaned: $1.12 billion
Crypto collateral held: $0.17 billion

Even considering the drop in value of most cryptos, that is insufficient to explain how they are holding so little collateral for such high liabilities. The were absolutely handing out under- or non-collateralized loans.

Voyager also admit handing out uncollateralized loans in the following legal case in NJ:

And yet, they deliberately don't make that obvious on their sites. And despite however many times I've told people to avoid these platforms, there are always multiple users saying "Well, they wouldn't do anything risky, funds are safu!"

Tether have said a lot of things which have turned out to be complete lies over the years, not least of which being "Tether is backed up 1-to-1 with USD". We've discussed this before: https://bitcointalksearch.org/topic/m.56656992. See also: https://bitcointalksearch.org/topic/m.51051918

Do you have a source for this?

They disclosed this policy, and it was public before their customers deposited their money. I don't think it is fair to cry 'scam' when this policy has been in place for time, and those trying to withdraw should not be surprised when they have to wait for a withdrawal.

It should also not be a secret that any company that pays interest on customer deposits is lending out those deposits (aka acting as a fractional reserve bank). There is literally no other way in which any company would be able to pay interest on deposits and not go out of business.

The teather statement said two things:
1 - that tether.io made an equity investment in celsius, and that equity investment is not part of their reserves.
2 - that tehter lent money to celsius, that was secured by collateral, which was held by tether, and in accordance with the terms of said loan, the collateral was liquidated to satasify (pay off) the loan in full, and excess collateral was returned to tether.

I am not aware of any facts to suggest tether is in danger of having less than full reserves as a result of what is happening with celsius. I think the speculation that tether will file bankruptcy and/or will be unable to redeem all of the USDT they have issued is baseless speculation.

Don't forget forcing their users to buy and hold their worthless token so they can "unlock" various tiers of rewards. And then of course when it comes to sell the token because you are leaving the platform, it is only worth 10% of what you bought it for.

The last few weeks have made it clear that very few of these platforms put aside any assets during the bull run on which they could now fall back on, and seemed be operating on the notion that bitcoin would just increase in value forever. Either complete naivety and amateur behavior from their owners, or they simply don't care if all their users get liquidated as long as they get to run off with some nice profits.

When you think printing tokens out of thin air will get you unlimited money forever, that's how things end..
Crypto.com was not getting most of their revenues from actual usage but from selling their token and listing cryptos and projects and taking a chunk out of those, since the hype died down, the consequences of not having a solid revenue model popped immediately:

Oct 28 2021
Crypto.com Plans Monumental $100M Ad Campaign, Taps Matt Damon to Feature

20 iun. 2022
Ad spending on TV has also been down: Crypto.com’s marketing expenses decreased to $2.1 million in May, from $15 million in November of last year

And when your revenue is down, what do you do, hammer your clients so you will lose customers and more revenue..
This was the moment to slash fees, to survive on assets put aside from the bull run, and to destroy your competition by offering cheap services, instead, they are doing it completely the opposite way.