Just two weeks after appearing in an ask me anything (AMA) with Celsius founder Alex Mashinsky, crypto Youtuber Ben Armstrong has announced he intends to file a class-action lawsuit against the lending platform and its chief executive.
Armstrong made legal threats via Twitter on Wednesday and has since provided more detail in multiple threads. His issue is centered on being unable to pay down loans with existing funds on the platform, and instead, having to deposit new funds to pay the loans off:
“[Our account rep] told us we had enough money in our account to pay off a loan. But we can’t use money in our account. We HAVE TO SEND CELSIUS MORE MONEY TO PAY IT OFF.”
“Imagine an insolvent company that you can’t withdraw your money from ASKING YOU TO SEND THEM MORE MONEY,” he added.
Armstrong stated that he is currently working through the process of getting all “disclosures, documents, loan details, etc” put together while speaking to attorneys to explore the best ways to go about the class action. Co-plaintiffs have yet to be added as Armstrong hasn’t “officially began moving.”
BitBoy Crypto is the second most subscribed crypto YouTube account with roughly 1.45 million subscribers and primarily provides commentary on market news/events. The channel is only behind Coin Bureau and its 2.07 million subscribers. BitBoy Crypto has plenty of detractors, too, some of whom allege that he has been paid to promote dubious crypto assets in the past.
Armstrong’s sentiments toward Celsius have swung wildly from just two weeks ago when he was featured on the ask me anything (AMA) session with Mashinsky on Celsius’ YouTube channel.
“And today I’m the victim. Kicking myself for wondering how I let this get so bad and so far,” he said.
Celsius is battling either insolvency or it’s experiencing severe liquidity troubles as a result of the crypto market plunge. The firm paused withdrawals on Monday, and also reportedly shifted around $320 million worth of assets to pay down loans and avoid liquidation on decentralized finance (DeFi) platforms such as Aave.
One issue to a potential lawsuit, however, is if Celsius files for bankruptcy because it will trigger a provision called “automatic stay,” which would prevent creditors from pursuing collection activity against the firm.
Celsius has reportedly onboarded restructuring lawyers from Akin Gump Strauss Hauer & Feld to find potential solutions for its financial troubles. However, Armstrong claims that these types of lawyers “specialize in MOSTLY preparing companies for bankruptcy.”
“Even if Celsius does file bankruptcy, we have discovered some potential workarounds to still do a class action lawsuit (not effected by bankruptcy). Unfortunately I have to keep that one close to the vest for now,” he said.
In terms of recouping funds from Celsius, there does at least appear to be a potential option for users with less than $25,000 on the platform to obtain their assets in the immediate future. Joshua Browder, founder of robot lawyer DoNotPay, tweeted a step-by-step strategy on Wednesday on how users might be able to get funds back:
“As of right now, these exchanges have not yet filed for bankruptcy protection. Therefore, they are subject to small claims court judgements. Small claims court cases typically take 1-2 months. As long as this drags on longer than that, this strategy will work.”
2. To file a small claims lawsuit, the first step is to send a demand letter.
The demand letter should say 1) how much you are owed 2) why you think you are owed the money.
For Celsius specifically, you should mail it (return receipt requested) to: — Joshua Browder (@jbrowder1) June 15, 2022
High net worth individuals (HNWI) have embraced cryptocurrencies and other digital assets, with 71% of wealthy individuals investing in digital assets according to a new survey.
Technology consulting company Capgemini released its 2022 “World Wealth Report” on Tuesday. It polled 2,973 global HNWIs, with 54% reporting a wealth band ranging from $1 million to $30 million and 46% reporting wealth of $30 million and over.
The survey asked about investment preferences for emerging asset classes such as digital assets, classifying them as cryptocurrencies, related exchange-traded funds (ETFs), nonfungible tokens (NFTs) and metaverse-related products.
Of the roughly one in seven wealthy individuals investing in digital assets, the highest concentration was under 40. More than nine out of ten in this age group have invested in digital assets. The younger cohort said cryptocurrencies are their favorite investment, with crypto ETFs and metaverse products also highly desired.
Crypto does not make up the majority of portfolios, however, and on average, HNWIs have only allocated around 14% into “alternative investments,” which include crypto alongside commodities, currencies, private equity and hedge funds.
Capgemini observed, however, the wealth management industry is seeing an influx of investments into digital assets and this has “increased the demand for educational capabilities.”
Nilesh Vaidya, the firm’s head of retail wealth management said:
“The influx of new investment avenues such as sustainable investing and digital assets is having a crucial impact on the wealth management industry. Wealth management firms must prioritize providing timely education around this trend to retain their customers.”
Some firms are already clued into this trend and are wanting the first-mover advantage into this niche sector by launching investment products targeted at the demographic.
The report comes after earlier research by Accenture, which revealed that 52% of wealthy investors in Asia held some form of a digital asset during the first quarter of 2022, making up, on average, 7% of the surveyed investors’ portfolios.
Similarly, Accenture also found that wealth management firms have been slow to adopt investment products with cryptocurrency or digital asset exposure, with a majority saying they have no plans to offer related services.
The United States Securities and Exchange Commission (SEC) has reportedly launched a probe to discover how crypto exchanges are working to prevent insider trading.
FOX Business reported on Wednesday that a person with direct knowledge of the SEC’s activities said that the commission had sent a letter to a major crypto exchange requesting information about how the platform protects users from insider trading. The source believes the same letter has been sent to multiple exchanges.
It is not clear which exchange or exchanges have received the request, but the news outlet said Coinbase, Binance, FTX and Crypto.com all declined to comment. The SEC also declined to confirm the probe.
The nature of the inquiry is also unclear. The SEC could be seeking out leads to litigate against an exchange’s potential legal violations via the enforcement division, or it could be a routine compliance check through the Office of Compliance Inspection and Examinations.
Allegations of insider trading at the largest nonfungible token (NFT) marketplace, OpenSea, have caught the attention of the SEC in recent weeks. Cointelegraph reported on June 3 that the commission could ultimately label NFTs as securities after charges of insider trading to OpenSea’s former product manager Nathanial Chastain surfaced.
Partner at the Hogan & Hogan law firm Jeremy Hogan told FOX Business that the SEC’s current interest in exchanges may stem from the allegations of insider trading on tokens that were scheduled for listing and were likely to see a price gain. Hogan said, “it's that sort of trading that the SEC might be forewarning the exchange they need to get control of.”
The proposed Digital Commodity Exchange Act of 2022 would see the SEC have its presumed jurisdiction over crypto exchanges rescinded. If it passes, the bill will give the Commodity Futures Trading Commission (CFTC) authority over crypto exchanges and stablecoin providers.
Current market conditions and ongoing scandals in the crypto industry may have catalyzed the SEC’s decision to start the inquiry. Early last month, the Terra ecosystem collapsed after the TerraUSD Classic (USTC) stablecoin depegged and the Luna Classic (LUNC) cryptocurrency plunged 99.9% in value.
More recently, the decentralized finance (DeFi) staking and lending platform Celsius has come under fire for freezing user withdrawals as rumors swirl around its potential insolvency amid huge transfers of crypto into FTX exchange.
This Daily Dose was brought to you by Cointelegraph.