- So your biggest fear actually happened.
The crypto platform holding your
money filed for bankruptcy.
It's a total disaster.
But is this the end?
All of your money gone forever?
Or is it a new beginning that will
help you recover your money?
The idea of bankruptcy has been around for centuries,
and thankfully, it's gotten a little bit less gruesome since then.
Back in ancient Greece, they used to force you
into slavery if you didn't pay your debts.
Yet there's never been a crypto bankruptcy as
big as what we're about to see.
And maybe you're thinking, let's bring back that Greek system,
because Voyager Digital and Celsius
are in uncharted territory, and I want my money back.
But no one knows for sure what will happen.
It's all extremely, extremely frustrating.
But I figured there must be some information out there
that I could use to get an idea of
So let's start at the beginning
with a piece of good news.
There are two main types of
corporate bankruptcy filings in the US.
Chapter 7 is when a company stops operating
and all of their assets are sold.
Under Chapter 7, the people a company
owe money to, their creditors, often get
back some percentage of their money.
That could be anything from less
than 1% and up to 100%.
It all depends on how much the assets can be sold for.
It's not ideal, but it's better than nothing.
But then there's chapter 11 bankruptcy.
This is the route that both Voyager and Celsius took,
and the difference here is very, very important.
It means they want to carry on with their business.
They're not giving up without a fight.
Chapter 11 is often called a restructuring bankruptcy,
and this could be good news for everyone.
Some companies come back from a
Chapter 11 stronger than ever before.
It can be just the thing they need to
smash their financial problems and recover money for creditors.
Yes, if it wasn't for Chapter 11, most
people would have never heard of that guy.
And asgard would probably be some expensive
anti itch cream, moving into movies was
the right thing for Marvel.
But it took serious balls.
They borrowed more money and got deeper into debt
to produce movies about their most popular characters.
And it actually worked.
But Chapter 11 can also go very wrong.
And some do go wrong.
Basically, there's only one guaranteed winner
of this battle: the lawyers.
We can expect a long drawnout process
filled with legal wrangling and sharp suits.
Are you happy with that scenario?
- Objection, Your Honor, Hearsay.
- Probably not.
And I'm afraid there's not much any
of us can do about it.
We don't yet have certainty on
what will happen to your cash.
The whole thing sucks.
However, what we can do is look at precedents,
previous legal cases that can help us get a
better grip on the story and possible outcomes for
your deposits. The biggest bankruptcy in American history was
the $619 billion Lehman Brothers collapse.
This was a massive part of the 2008 financial crisis,
and the bankruptcy filing dragged on for years.
But it's not all bad.
They appear to have fully paid
back all of their customer accounts.
So this gives Voyager and
Celsius customers some hope, right?
Maybe.
Maybe not.
We have to zoom in closer to
a case within the crypto world, Mt. Gox.
It's the highest profile crypto bankruptcy so far.
Early Bitcoiners will remember, but Mt. Gox was
an international crypto exchange that essentially imploded,
tearing apart the crypto world for quite a while.
And there's one thing we can learn from Mt. Gox.
It can take time.
Like, a lot of time.
Their creditors are finally getting some
money back, after waiting 8 years.
And then there's the Cred platform bankruptcy, which is
extremely messy.
This is a lower profile case, but still
involves $160 million in debts, inflamed passions, a fugitive
executive, and customers classified as unsecured creditors.
That last bit means that customers are way down on
the list of people to get paid back, which ties
in with what Coinbase said recently about their customers being
unsecured creditors at the bottom of the list as well.
Their CEO said they're not at risk of going
bankruptcy anyways, but yeah, we've heard that before.
And this brings me to a personal anecdote.
I don't claim to know absolutely everything going on
in the crypto sphere, especially like, the balance sheets
of individual companies, but I can tell you,
there's only one single crypto company that I work with
that hasn't lowered advertising rates
in the last few months, and that's Kucoin.
Listen, they're not the easiest to use platform in
the world, but I believe that it's really smart
to use multiple platforms to just diversify your money
in case things like this happen.
And Kucoin has tons of features that I personally
utilize all the time, like much safer crypto lending.
If you're interested in trying them out
and getting another platform, there'll be a
discount link in the description.
Now, patience is a virtue with bankruptcies in general,
and no one can tell us just how much
patience we'll need in this exact scenario.
I mean, even Voyager's attorney called their bankruptcy a
trip into uncharted territory, which is the last thing
you want to hear from a lawyer.
Like, imagine if your doctor said, I'm going to have
to operate, but I never done anything like this before.
To further understand what might happen
in today's bankruptcies, we need to
dive deeper into the exact details.
Voyager wants to assure customers that they've not lost
everything, which is kind of like your doctor from
earlier saying, "Good news, we did the operation.
You're not dead, but you are paralyzed."
So Voyager froze withdrawals and moved into
Chapter 11 bankruptcy as soon as possible,
which caused people to panic even more, rightfully.
They have 3.5 million active users
and billions in crypto assets on the platform.
It sounds impressive.
So what's the problem?
Three Arrows Capital is the problem.
650 million problems, to be exact.
Incredibly, Voyager lent this massive amount to
that hedge fund on an uncollateralized basis.
Nothing backing up the loan.
Then Three Arrows went kind of...
This fund had $10 billion in assets
under their control at one point.
But now the founders are hiding under a rock
somewhere while the firm gets liquidated and no one
knows if they'll ever get their money back.
It's not looking very good.
All the recent collapses are far
more related than you think.
It's total contagion because Three Arrows began with
the collapse of our old friend UST.
It turns out that all these crypto lending
ventures depended on one another to keep paying
each other back with a total sum of
money that really wasn't backed up by anything.
All it took was one piece to topple over
and the whole thing started to collapse.
And the real losers here are the customers who
just wanted a small yield on their Ethereum.
And the biggest disgrace about all this is how
there was zero transparency about what's going on.
Normal customers were often encouraged to treat these
platforms like simple crypto banks, rather than these
From here, Voyager has two possible ways forward.
One, they say they could sell the business to someone who
would take over and pay everyone who is owed money.
It could maybe work.
It would at least give a little bit more
trust to the platform with a new owner.
But is it likely?
It's really hard to say.
For the right price, sure, there will be
buyers, but that'll be cheap, given it's a
distressed business with pissed off customers and a
gaping black hole on their balance sheet.
That takes us to possible plan number two.
This would involve cobbling together all their assets like
Voyager tokens, all their equity shares, and anything they
could manage to get back from Three Arrows to
then refund customers as much as they possibly can.
Sounds a bit like scrambling behind the sofa to
find a couple of quarters, but it might work.
However. Problem.
They said in the first bankruptcy hearing
that they don't believe crypto assets in
customer accounts belong to those customers.
That's honestly gross.
Like they did nothing to earn those deposits.
Maybe the interest earned.
There's some argument there.
But the deposits?
It's so insane to me that they could say that.
And here's the kicker.
They tried to be nice.
There's $350 million in cash held
in customer accounts right now.
And they were like, we'll give them that.
How generous.
This is one of the key points
that these bankruptcies are going to have to establish.
Everyday investors are already at the end of
the line when getting paid debt wise.
And now the businesses are saying we don't
even own what's in our very own accounts.
I just hope the justice system solves
this with the end customer in mind.
It's insane to me that this is even a debate.
Now, I looked at the Celsius collapse a
while ago and how they froze customer
withdrawals due to a lack of liquidity.
Things got worse, and the next steps saw
them start Chapter 11 bankruptcy proceedings as well.
But at the same time, they announced
they would emerge stronger from this process.
Right now, they've got assets and liabilities between
$1 billion and $10 billion, with over 100,000 creditors.
Their biggest unsecured creditor is Pharos Fund,
who's owed $81 million.
In terms of cash, they've got $167 million.
But they plan to plow on, just like Voyager.
So they want to use that cash to carry on
operating while they go ahead and restructure the business.
According to a Reddit user who analyzed the figures, the
company's black hole is probably about one $1.1 billion.
A lot of money, but honestly, it could have been worse.
So can they possibly turn this ship around?
The CEO, Alex Mashinsky thinks this is
a defining moment for Celsius.
But he's also the guy who likened
their business model to neighborly love, so
people aren't exactly hanging on to his every word now.
Celsius has been called deeply insolvent
and is being investigated by multiple authorities.
They've been frantically shuffling money about,
trying to pay off debts.
But people want their sugar back, and
it seems highly unlikely that there's enough
of that sweet stuff to go around.
I think the current situation is slightly clearer
now that we've looked at all the facts.
Both these companies have massive debts that
they simply can't pay back in full.
The collapse of UST and then Three Arrows
pretty much left them high and dry.
But that's because the business models and
returns were unsustainable in the first place.
By going for a Chapter 11 bankruptcy, they've
got a chance to restructure the business and
maybe, just maybe, pay everyone back.
There needs to be a sustainable business at the
heart of the wreckage that can be salvaged.
That's what a new restructured
company could spring up from.
It's too early to tell, though
if that's the case, we need more information on
how exactly they plan to operate in the future.
So Voyager is looking to sell as their first option,
while Celsius plans to press on full steam ahead.
Both are long shots, though, and sometimes
they pay off, but they usually don't.
In fact, this looks to me more like
an eyeshut, fingers crossed, Hail Mary pass.
Here's my personal take.
I think a complete recovery to
business as normal is unfortunately unlikely.
But I do think there will be
some degree of payback to customers.
Maybe not 100%, but something.
And it will take time.
Like, a lot of time.
The biggest thing that resonates with me in all of
this is the classic not your keys, not your crypto.
There's a reason why anyone who's been in a
space for a long time keeps as much as
possible decentralized or at least diversifies platforms.
They've seen the Mt. Goxes.
They've seen the Quadrigas and now
the Celsius and the Voyagers.
My heart seriously goes out to anyone
who has been impacted by these events.
It's insane to me, but I'm certain will
come out of this stronger than ever before.
So I'd like to thank you so much for
watching, and I hope you have a profitable day.
[Captions by captiontree.com]