In September last year, Alex Mashinsky was riding high.
Appearing on a panel sponsored by Johns Hopkins University to talk about bitcoin and other cryptocurrencies, Mashinsky, the chief executive of the crypto banking firm Celsius, exuded confidence about the future of crypto and disdain for traditional banks and traditional currencies.
"The banks have abused their power," Mashinsky said, citing the discrepancy between the interest that banks pay on dollar deposits — an annualized rate of less than 1% — and the nearly 9% that Celsius paid on deposits of some digital currencies. "Is the real value of money 0.1%?" he asked. "Or is the real value of money ... 8.8%?"
To hundreds of Celsius' 1.7 million customers, the value of the $11.7 billion in assets they deposited with the firm might as well be zero.
"Mashinsky always talked very confidently about how strong Celsius was and how much better than banks," recalls Harold M. Lott, 35, a Nashville-area nurse who had as much as $14,000 in cryptocurrency assets deposited at Celsius at the peak of the crypto market.
"He never gave any indication that there was a problem," Lott says. "But suddenly, out of the blue, they just stopped all transfers."
That was on June 12, when the company froze all customer withdrawals and other transactions. On July 13, Celsius filed for bankruptcy protection, revealing that it owed customers $4.7 billion but had only $170 million in cash on hand. All told, the company declared a $1.2-billion discrepancy between its assets and liabilities.
Lott is among hundreds of small investors who have written to Bankruptcy Court Judge Martin Glenn, who is overseeing the case, to ask that their funds be sprung from legal purgatory.
They're retirees, small-business owners, ordinary workers. They've been saving for retirement or to buy a home or to send their children to college — funds that they fear will be gone forever. They write of being ashamed, depressed and suicidal.
Generally speaking, the letters open a window on hazards of investing in the volatile cryptocurrency markets, or with firms that lack a long track record of serving customers and operate without the government safeguards afforded to traditional bank depositors and stock and bond investors.