A Followup on Celsius Crisis: "IOU" Token, Celsius' "Hail Mary Pass"?

It has been more than three months since the Celsius crisis. A lot of things happened on the planet during the time: the former Prime Minister of Japan was openly shot and died in public, the euros keep dropping value, the Taiwan Strait tension escalated, and the Queen Elizabeth passed away. The status of the Celsius crisis seems to be fluctuating along within this constantly changing world, but somehow it seems unchanged, because what we have been seeing is hopes being built up and then shattered, again and again.

Recently, someone revealed a senior meeting at Celsius with a secret recording. It looks like Celsius intends to create a brand new token named 'IOU (I Owe You)' to deal with the fund shortage.

So today, Fazzaco will walk you through the stories related to Celsius in the last three months.

Celsius says it gets cash injections, and the U.S government doesn't think so

Back in August, law firm Kirkland & Ellis filed that the lender could run out of funds by October. The firm also owes depositors $2.8 billion more in crypto than it's currently holding.

However, Celsius announced that it has gotten several proposals to inject cash into the company and won approval from a U.S. judge to sell bitcoin (BTC) that it mines​. In specific, the CFO at Celsius claimed that they have received a total of 81 million cash injections in total, enough to cover their operational costs and allow them to make it through 2022. It further explained that 61 million came from Bitfinex's loans, while the rest, 20 million, came from tax savings as well as the selling of the mining equipment.

But soon, U.S. government officials asked that an independent examiner be appointed to look into Celsius' collapse into bankruptcy. The U.S. Trustee office, which oversees bankruptcy matters, said there are "numerous questions" about Celsius' operations and its financial health, as well as how its management allowed it to enter bankruptcy, according to a court filing on August 18. The U.S. Trustee specifically noted that Celsius took out a third-party loan but did not identify who the lender was, what the collateral was or what kind of loan was issued. Moreover, this was even after the lender revealed it could not return the collateral.

Remember Jason Stone, the guy who sued Celsius? He just got sued back

Back in July 7, Jason Stone accused Celsius of running a Ponzi scheme resulting in freezing customer funds​. He hired Roche Freedman LLP, a professional crypto-related law firm to handle his case.

The court filing during mid and late August claimed that Celsius lent Stone crypto assets that would be used for staking purposes and the company later asked to reclaim the funds. However, allegedly not all the funds were returned and Celsius claims a "substantial gap remained."

"As Celsius only later would learn, Stone's repeated assurances that he could, and would, return all of Celsius' coins were lies designed to conceal the fact that he either had lost or stolen a substantial number of coins," Celsius insisted. The company further alleged that rather than staking the tokens, Stone used them to purchase NFTs.

While Stone's lawsuit said that the crypto lender's entire portfolio had naked exposure to the market, Celsius's court filing insisted that Stone stole funds from the lender. "The defendants were not just incompetent, they also were thieves," the Celsius countersuit contended.

On the other hand, Celsius sued crypto custodian Prime Trust on August 23​, in an attempt to claw back $17 million in crypto that the bankrupt lender alleged its former business partner still holds.

Found new money in the pocket? Celsius has new hopes, again

The queue lining up before the gate of Celsius asking for their money back keeps growing. On August 31, a group of custodial-account holders at Celsius has formally asked the court overseeing the crypto lender's bankruptcy case to authorize the return of their funds. The group is composed of 64 people who hold at least $22.5 million in cryptocurrencies with Celsius's custody service. It is separate from the Unofficial Committee of Creditors (UCC), another organized set of Celsius customers.

Nevertheless, Celsius said on September 1 a freshly found $70 million pile of cash​ will likely help it continue operating through the end of 2022. According to a document filed the law firm Celsius has hired to help it restructure, Celsius expects "approximately $70 million of proceeds from the repayment of USD denominated loans."

From a desperate estimate earlier that predicted they would be running out of money in October, to this "finding unexpected cash in a pair of unwashed pants" moment, Celsius, a once leader of the crypto lending business, had really put up a nice drama up there.

IOU Token - Is it Celsius' "Hail Mary Pass"?

When Celsius asked the court for authorization to sell its stablecoin holdings​ in order to generate liquidity to help fund its operations in mid-September, we believe that they were actively trying to save themselves. But it makes us have a second thought when the freshly exposed story tells us that they are planning to convert the debts into the so-called "IOU (I Owe You)" cryptocurrency.

Tiffany Fong, who claims to be one of the 500,000 Celsius customers with monies locked in the platform, provided the giveaway recording. According to Fong, the employee who provided the tape to her maintained their anonymity throughout their correspondence. CTO at Celsius responded to the story afterwards, saying that the plan is still in "early stages", and what's laid out may have changed in the weeks since the call.

​In the recording, the co-founder of Celsius, Nuke Goldstein, described a reimbursement scheme for clients who deposited funds in the "Earn" account, for which Celsius had guaranteed yields of up to 17%.

Conclusion

It can be seen that Celsius has been putting a big drama over the months, yet the fact that investors are still not seeing the way they get their money back remains unchanged. Fazzaco will keep following up the future status of this event.