Leaked audio from Celsius meeting reveals plan to pivot to custody cases

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Neither the author, Ruholamin Haqshanas, nor this website, The Tokenist, provides financial advice. Please review our website policy before making any financial decisions.

Embattled crypto lender Celsius could restructure its business to become a crypto repository, says audio of an internal meeting shared by a client of the company. At the meeting, CEO Alex Mashinsky and fellow executive Oren Blonstein outlined the custody plan, suggesting the company could shift to charging customers fees for certain transactions.

Celsius Could Reemerge as Kelvin as a Crypto Custody Company

Celsius CEO Alex Mashinsky drafted a new plan to relaunch the company during a meeting with employees Sept. 8, The New York Times reported, citing a recording of the event. Mashinsky and Blonstein suggested revamping the company with a focus on crypto custody, which means they store users’ digital assets and charge them fees on certain types of transactions.

The new company was codenamed Kelvin, which might seem like a reasonable successor to Celsius. To build employee trust and confidence, Mashinsky compared the company’s new roadmap to corporate turnarounds at some of the world’s most famous brands.

He specifically mentioned Pepsi, which went bankrupt in 1923 and 1931and Delta Airlines, which filed for bankruptcy in 2005. “Does that make the Pepsi less good?” Mr. Mashinsky asked the employees. “Delta has filed for bankruptcy. Don’t you fly with Delta because they filed for bankruptcy? »

As reported, Celsius filed for Chapter 11 bankruptcy in mid-July, more than a month after freezing client assets following severe turmoil in the crypto market following the catastrophic implosion. of Terra.

The company owes much of its fame to the unprecedented APY rates of over 10% on cryptocurrencies, a promise that has proven untenable. In order to afford these high rates, the company made risky investments that quickly turned sour when the crypto market crashed.

Earlier court documents said Celsius had a $1.2 billion gap in its balance sheet. However, a filing in mid-August revealed that the crypto lender is in even worse financial shape. According to the filing, the company has $2.8 billion in crypto liabilities and is also on course to run out of cash by October.

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Celsius’ new initiative will be based on fees

Founded in 2017, Celsius started out as a crypto lending platform marketing itself as a no-fee service. The platform’s tagline was “get out of the bank”, which the executives used as part of their pitch that customers should disconnect from traditional finance. However, the company’s new business structure is a completely new approach. Blonstein said:

“If the foundation of our business is custody, and our clients choose to do things like invest somewhere or trade one asset for another, or take out a loan against an asset as collateral, we should have the ability to charge a commission.”

However, the ball is not in Mashinsky’s court regarding Celsius’ fate. Martin Glenn, the federal bankruptcy judge in New York overseeing the restructuring process, must approve any potential proposal.

It should be noted that before being presented to the court for approval, Celsius’ Unsecured Creditors Committee (UCC) must confirm all possible proposals. However, the UCC reportedly expressed skepticism about the plan and particularly Mashinsky’s role in the venture. Simon Dixon, founder of Bank to the Future and creditor of Celsius, said:

“I will support any plan that makes creditors whole, so I will hear all plans. Having Mashinsky in charge is a magnet for regulatory closure and financial disaster for all creditors IMO. I will remain open-minded, but ignoring this reality is not the road to recovery in my humble opinion.

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Do you think Celsius can gain user trust after its previous failure? Let us know in the comments below.

About the Author

Ruholamin Haqshanas is an accomplished crypto and finance journalist with over two years of writing experience in the field. He has a strong understanding of various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi) and the emerging non-fungible token (NFT) market. He is an active user of digital assets for remittances.

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