Hong Kong News

Nonpartisan, Noncommercial, unconstrained.
Thursday, Feb 02, 2023

Crypto bankruptcies threaten customer life savings

Crypto bankruptcies threaten customer life savings

A judge will hear a request to honor Voyager Digital customer withdrawals

Some crypto investors are on the edge of financial ruin after trusting their nest eggs to two unregulated crypto marketplaces that went bankrupt.

Many put their life savings into virtual currency only to see their money frozen while the courts decide the fate of their investments.

Their plight has members of Congress calling for investor education and greater regulation.

Senators Debbie Stabenow, D-Mich., and John Boozman, R-Ark., introduced a bill Wednesday to give the Commodity Futures Trading Commission new tools and authorities to regulate digital commodities.

The logo of the crypto company Celsius on a computer screen June 14, 2022.

New laws will come too late for customers of Celsius Network and Voyager Digital.

One investor named Donald said he feels "completely ashamed and embarrassed" for sinking $31,000 into Voyager Digital Holdings.

"Losing this money with no end in sight has been unbearable for my family and I," Donald said. "I wake up most nights and just walk up and down the stairs contemplating on my own mistakes and wondering if this will ever end."

John Dalisay, who is paralyzed from the neck down, sent a letter to a judge saying he is depressed and unable to work after his life savings were frozen.

"I already suffered a tragic loss of my ability to ever walk again and did my best to be strong and fight to start over with my life," Dalisay wrote. "I feel humiliated and defeated."

Dalisay invested money from his $8-per-hour job at Celsius Network.

"I do not seek luxuries, your honor," he wrote. "I only wanted to be able to afford basic necessities. Please help me be whole again as this situation Celsius created is wreaking havoc on my mental health."

Voyager customers asked a judge to unfreeze their accounts. A hearing on that motion is scheduled for today.

Crypto lender Celsius and crypto broker Voyager Digital filed for Chapter 11 bankruptcy in July, freezing their customers’ assets. Celsius has 1.7 million customers and $6 billion in assets. Voyager counts 3.5 million users and over $5.9 billion of cryptocurrency assets.

Corporate bankruptcies are generally battles between rival groups of Wall Street investors backed by lawyers who often bill $1,000 or more per hour.

The Celsius and Voyager cases are exceptions. Everyday investors are flooding the courts with desperate pleas asking for their money back.

"There’s rarely enough money to cover the investor," said Melanie Senter Lubin, president of the North American Securities Administrators Association, who testified last week at a Senate Banking Committee hearing on crypto fraud.

"If those investors are considered unsecured creditors, they’re going to be put in the pool with everybody else, and they’re typically at the end of the line."

Safer than a bank?

Celsius and Voyager promoted the safety of their investments.

"Celsius stated overwhelmingly … that putting our funds into [their] custody was much safer than having it at a regular bank account," wrote Paul Niehe, who transferred his pension savings into crypto.

Ryan Hourigan invested a portion of his paycheck into Voyager every month on top of rolling his life savings into his account.

"I used Voyager to replace my savings account as it was advertised as FDIC insured," Hourigan said. "I am now filled with regret for doing so and fear that I pretty much lost everything for trusting this company."

"They made astonishing claims, like offering up to 20% interest while claiming they were FDIC insured and quote ‘safer than banks,’" Sen. Elizabeth Warren, D-Mass., said at last week’s hearing. "No risk. Twenty percent return. That was a lie from the start."

This May 4, 2021, file photo shows the Federal Reserve building in Washington.

The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve have ordered Voyager to stop making false and misleading statements concerning its FDIC deposit insurance status and to take immediate corrective action.

Celsius allowed customers to get loans in real dollars by using their crypto holdings as collateral. Customers could also earn interest by lending their deposited coins, according to the company's white paper.

Voyager offered a secure way to trade over 100 different crypto assets using a mobile app and advertised rewards on more than 40 cryptocurrencies, the company's white paper said.

At least one person has turned to crowdfunding for help. Eduardo Dorrance wants to save his family’s animal rescue with a GoFundMe campaign. His family is a month away from losing the business.

Crypto winter
The Binance Exchange website on a laptop computer arranged in Dobbs Ferry, N.Y., Feb. 20, 2021.

Crypto investors who used other platforms are not immune from losses.

Cryptocurrencies lost an estimated $2 trillion in value since peaking last year in a market collapse nicknamed the "crypto winter."

Bitcoin, the biggest cryptocurrency, topped out at $68,789 per coin Nov. 10, 2021, before falling to a low of $17,709 June 18, according to CoinMarketCap data.

"It’s very important that people understand how a particular investment works, how they could lose money in the investment, what they pay for that investment, and what recourse they have," Gerri Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority, said.

"When this is happening outside the space of regulation, the recourse of investors can be difficult."

Walsh testified at the Senate hearing.


Oh ya 180 days ago
It is not up to the government to baby sit the stupid greedy people. The stupid people heard what they wanted to hear 20% interest.. They went to the crypto casino and lost. Stop whining


Related Articles

Hong Kong News
WARNING GRAPHIC CONTENT - US Memphis Police murdering innocent Tyre Nichols
Almost 30% of professionals say they've tried ChatGPT at work
Interpol seeks woman who ran elaborate exam cheating scam in Singapore
Chinese search giant Baidu to launch ChatGPT like AI chatbot.
What is ChatGPT?
Bill Gates is ‘very optimistic’ about the future: ‘Better to be born 20 years from now...than any time in the past’
China is opening up for foreign investors.
Tesla reported record profits and record revenues for 2022
Prince Andrew and Virginia Giuffre Photo Is Fake: Ghislaine Maxwell
Moonwalker Buzz Aldrin Gets Married On His 93rd Birthday
Federal Reserve Probes Goldman’s Consumer Business
China's first population drop in six decades
Microsoft is finalising plans to become the latest technology giant to reduce its workforce during a global economic slowdown
China's foreign ministry branch in Hong Kong urges British gov't to stop the biased and double standards Hong Kong report
China relaxes 'red lines' on property sector borrowing in policy pivot
Tesla slashes prices globally by as much as 20 percent
Japan prosecutors indict man for ex-PM Shinzo Abe murder
Vietnam removes two deputy PMs amid anti-corruption campaign
1.4 Million Copies Of Prince Harry's Memoir 'Spare' Sold On 1st Day In UK
After Failing To Pay Office Rent, Twitter May Sell User Names
FIFA president questioned by prosecutors
Britain's Sunak breaks silence and admits using private healthcare
Hype and backlash as Harry's memoir goes on sale. Unnamed royal source says prince 'kidnapped by cult of psychotherapy and Meghan'
China’s recovery could add 1% to Australia’s GDP: JPMorgan 
Saudi Arabia set to overtake India as fastest-growing major economy this year 
China vows to strengthen financial support for enterprises: official
International medical experts speak out against COVID-19 restrictions on China
2 Billion People To Travel In China's "Great Migration" Over Next 40 Days
Google and Facebook’s dominance in digital ads challenged by rapid ascent of Amazon and TikTok
Flight constraints expected to weigh on China travel rebound
Billionaire Jack Ma relinquishes control of Ant Group
FTX fraud investigators are digging deeper into Sam Bankman-Fried's inner circle – and reportedly have ex-engineer Nishad Singh in their sights
Teslas now over 40% cheaper in China than US
TikTok CEO Plans to Meet European Union Regulators
UK chaos: Hong Kong emigrants duped by false prospectus
China seeks course correction in US ties but will fight ‘all forms of hegemony’, top diplomat Wang Yi says
China will boost spending in 2023
African traders welcome end of China’s Covid travel curbs
France has banned the online sale of paracetamol until February, citing ongoing supply issues
Japan reportedly to give families 1 million yen per child to move out of Tokyo
Will Canada ever become a real democracy?
Hong Kong property brokerages slash payrolls in choppy market
U.S. Moves to Seize Robinhood Shares, Silvergate Accounts Tied to FTX
Effect of EU sanctions on Moscow is ‘less than zero’ – Belgian MEP
Coinbase to Pay $100 Million in Settlement With New York Regulator
Preparations begin for Spring Festival travel rush
Domestic COVID-19 drug effective in trial
HK to see a full recovery, John Lee says in New Year message
Bargain hunters flock to last day of Hong Kong brands and products expo
Hong Kong aims for January 8 reopening of border with mainland China