Molly White

Video: The charges against Binance

2024-01-15T00:00:00+00:00

This is the script for “The charges against Binance”, a video about the legal actions against Binance and its former CEO, Changpeng Zhao.

On November 21, the United States announced a landmark resolution to multiple years-long investigations into the world’s largest cryptocurrency exchange: Binance. The company’s founder and CEO, Changpeng Zhao, agreed to plead guilty to a felony, pay a fine, and resign. Binance itself pleaded guilty to three charges, agreed to pay a total of $4.3 billion in fines and restitution, and agreed to a massive overhaul of its compliance program, with an independent monitors to be installed to hold them accountable. Coming only weeks after the conviction of Sam Bankman-Fried, CEO of the once second-largest global cryptocurrency exchange, this seems like another huge moment in the crypto crackdown.

But is it? Or is it just a slap on the wrist? And what happens to Binance now?

Let’s take a dive past the headlines, into the history of Binance, what they did, why the United States government even cares about a crypto exchange located offshore, and what this resolution is likely to mean both for Binance and for the crypto industry going forward.

I’m Molly White, a cryptocurrency researcher and industry critic who writes about crypto and the broader technology world in the Citation Needed newsletter. I also created and write Web3 is Going Just Great, a website where I track only some of the many examples of how cryptocurrency and web3 projects are failing to live up to their promises.

History

Binance was founded in 2017 by Changpeng Zhao, who is better known online just by his initials: CZ. CZ was born in China, but he and his family fled the country when he was twelve years old after the massacre at Tianmen Square. He spent the rest of his youth in Canada and ultimately earned a computer science degree from a Canadian university before returning to China in 2005 to work in the traditional finance and technology sector. He claims that in 2013, after hearing about Bitcoin during a poker game, he sold his apartment in Shanghai and went all in, buying a million dollars’ worth. The same year, he joined what would later become the cryptocurrency company Blockchain.com. In 2014, he was hired by a woman named Yi He to serve as chief technology officer for another crypto exchange, OKCoin (now rebranding to OKX).

After that, he founded Binance, and that’s when things start to get… really murky… in ways that are somehow widely accepted within crypto. Binance is an enormously secretive company, and it has actively worked to obscure even the most basic facts, like where it’s based and who else forms its senior leadership. I’m going to do my best here.

CZ founded Binance in June 2017, but he didn’t work alone. Although CZ is the public face of Binance, and often described as though he is its sole founder, he had at least one other co-founder. The known co-founder is Yi He, who had hired him to work at OKCoin, although she’d left the company by the time he recruited her. The Department of Justice has described a third co-founder, a man whose identity I’ve not been able to determine. We do know a little more about Yi He these days, but her role at the company, and even her existence, has not always been widely known. She keeps a low public profile — which she says is because she doesn’t speak much English, and she fears that speaking Mandarin will lead people to believe Binance is a Chinese exchange: something that CZ has gone to great lengths to dispute. Despite remaining out of the public eye, she has been enormously influential at Binance: in addition to being a core decisionmaker at the company, she helped with the early marketing that rocketed Binance to its status as the largest global exchange. Since then, she’s held roles including chief customer service officer, running Binance’s multi billion dollar venture capital fund, and running the group that decides what tokens Binance will list for trading on the exchange.

Oh, and — she also has kids with CZ. She’s described him as something like a “college roommate” and a “comrade-in-arms”, and has balked at comparisons between their relationship and that of Sam Bankman-Fried and his lietuenant, Caroline Ellison. “Caroline was an employee, whereas I am a partner,” she insists.

Binance’s locus of operations

In September 2017, only months after Binance opened up shop, China started to crack down on the crypto industry in a major way. Rather than shut down, Binance relocated to Japan. But in 2018, Japanese regulators warned the company about operating without a license, so it uprooted itself once again, this time to Malta. But even the crypto-friendly Malta intervened in 2020, announcing that the company was unlicensed there, too.

Since then, Binance has claimed not to have any headquarters. CZ is based in the United Arab Emirates, and since 2021, most of Binance’s senior leadership has been located either there or elsewhere in Asia.

Binance growth

Within days of its launch in mid-2017, Binance grew really quickly, amassing more than 120,000 users within only 45 days. Almost a quarter of them were based in the United States.

By March 2018, Binance had already become the largest exchange globally as measured by trading volume: a status it maintains today.

By this time, the company had begun to feel some heat around their operations in the United States, where they were not registered and where they were blatantly flouting US financial laws.

But the number of customers from the US and the amount of money they were trading would prove to be too alluring for Binance to quit, even as CZ acknowledged internally that they should be blocking US users from the platform. According to internal documents, in March 2018, the company had around 3 million users from the United States — more than one third of their overall userbase.

“Compliance”

Probably in part because of this heat around US customers, in April 2018, Binance hired its first Chief Compliance Officer — something they’d yet to do despite having almost ten million users by that point. When they finally got around to it… well, they found someone who either couldn’t or wouldn’t do a very good job of it.

That person was Samuel Lim, and although he at times spoke to other senior leaders about making sure Binance was compliant in the United States and in other jurisdictions, he didn’t seem to try all that hard to actually get them to do anything. Sometimes, he was the one helping Binance avoid becoming compliant.

This will be a recurring theme throughout this video: although CZ and other executives sometimes discussed making changes that would reduce illicit activity on the platform and bring it closer to compliance with regulations, they never actually did much. Later legal documents would reveal that Binance has been extremely focused on appearing to be compliant, including in internal conversations and policies, without actually being compliant. In a chat in October 2020, Lim wrote that Binance’s compliance was just “email sending and no action … for media pickup … I guess you can say it’s ‘fo sho.”

Before diving in to the details of what Binance was doing, let me quickly explain what I mean by “compliant”. Financial companies that serve US markets are required to abide by, among other things, a law called the Bank Secrecy Act. A more apt name for it might be the Bank Not-so-much Secrecy Act, because it’s a law that requires banks and other financial institutions to proactively share information with the US government in order to try to prevent money laundering, tax evasion, and really any kind of illicit activity involving money. The Act was signed into law in 1970 during the Nixon administration, but was strengthened in the wake of the 9/11 attacks under the PATRIOT Act, in an attempt to curtail terrorist financing. The Bank Secrecy Act is the reason you have to provide substantial proof of your identity to financial institutions — like an official government identity document and not just your name — and it’s why financial institutions have to keep records and are required to file what are called “suspicious activity reports” on customers who move around large sums of money or otherwise raise red flags. When I talk about the Bank Secrecy Act, I’ll repeatedly use two related acronyms: KYC and AML. AML stands for anti-money laundering, and is just what it sounds like: programs by financial institutions to detect and prevent customers who are trying to launder money. A part of AML is KYC, which stands for “know your customer” or “know your client”. This refers to the processes by which financial companies make sure the people using their services are who they say they are. If you’ve signed up for an account on a cryptocurrency exchange — or with really any financial company — and they’ve required you to submit a scan of your passport or driver’s license, that’s KYC. Companies that fail to do a good job at KYC and AML face the risk of winding up on the bad side of a bureau of the Treasury Department called FinCEN: the Financial Crimes Enforcement Network.

Despite serving US customers since their inception, and as such being required to register with FinCEN, Binance never did. The Bank Secrecy Act required them to file suspicious activity reports, but despite regularly discussing suspicious activity internally and sometimes shutting down accounts connected to criminal operations, Binance never filed a single suspicious activity report. And Binance certainly never complied with the Bank Secrecy Act’s requirements around anti-money laundering and KYC, in part because the vast majority of customers provided no identifying information whatsoever to Binance.

Level 1 accounts

See, Binance had what they called “Level 1” and “Level 2” accounts. Level 1 accounts were anonymous — all people had to give Binance was an email address, and a pinky swear that they weren’t in the US or “on any economic sanctions list”. Level 2 accounts required a more complete set of KYC information from the user, including their government ID document or number, citizenship, and residential address. However, there was almost no incentive or requirement to sign up for a Level 2 account, and so most people didn’t. The only real downside to having a Level 1 account was that you could only withdraw up to 2 bitcoins per day — but even this wasn’t really a barrier. For one, 2 Bitcoins were worth more than $100,000 at various points while Binance supported these “Level 1” accounts, so it was a pretty high limit. But besides that, if people wanted to withdraw more than that in a day, they could just create new accounts with new email addresses and cash out as much as they wanted.

Binance users had the option of creating a Level 1 account for four years, until the company finally decided they had to shut down the offering in May 2022. And even after that, customers could evade KYC until at least October 2022 by going through what Binance variously called “exchange brokers” or “nested exchanges”, which traded on customers’ behalf without doing adequate KYC. Through that loophole, Binance ended up providing services to groups like the SUEX exchange which processed transactions for ransomware attacks like the one on Colonial Pipeline, and for Garantex, which processed ransomware transactions such as those involved with the Conti ransomware.

Failure to identify US-based customers

But despite the lack of identity documentation from their customers, Binance would have still been able to make some inferences about their customers’ locations based on what’s called their IP address: an identifier assigned to any device accessing the Internet. By examining the IP addresses used by their customers, Binance could have made a pretty good guess about where they were based. Instead, Binance chose willful ignorance, with CZ internally acknowledging that they would have had far fewer users and less revenue had they blocked US users. “Better to ask forgiveness than permission,” he wrote.

Failure to identify customers in sanctioned locations

US customers weren’t the only people Binance was failing to identify. They also served many customers from jurisdictions that are subject to comprehensive sanctions by the United States, such as Iran, North Korea, and Syria. This would have been less of an issue if they weren’t also serving US customers, but because they were, and because cryptocurrency exchanges work by matching people who want to buy crypto with those who want to sell it, they were facilitating trades between Americans and sanctioned individuals. As far back as 2018, Binance gave lip service in their policies to banning customers from sanctioned areas, but in fact were well aware that they had many such customers. Internally, they acknowledged that they had processed at least a million transactions with Iranian customers alone. However, they tried to conceal this fact when contacted by law enforcement, with Chief Compliance Officer Samuel Lim stating: “We definitely do not want to acknowledge we have [Iranian users] onboard, as our official stance is we gotten rid of them all(sanctions) and blocked.”

Also in 2018, Lim spoke of being nervous about lying about sanctions enforcement. “There is no fking way in hell I am signing off as the CCO for the ofac shit,” he wrote. This seemed to stem from an understanding of his own personal liability — he would later write in a chat message to a colleague: “US users = CFTC = civil case can pay fine and settle no kyc = BSA act [sic] = criminal case have to go [to] jail”.

Criminal activity

Besides all these customers they weren’t supposed to be serving, Binance also knew that their lax policies were attracting serious criminals to the platform. In July 2017 – the very same month Binance began operating – US authorities filed 21 charges against the operators of a Russian bitcoin exchange called BTC-e, and explicitly called out how its lack of KYC was enabling criminal money laundering. Binance executives were later briefed on this enforcement action, and on how BTC-e’s operations resembled Binance’s own business practices.

In August 2018, a service provider came to Binance with concerns about “one of the worst hacking groups we have seen”, and how they were using multiple Level 1 accounts to cash out just under 2 BTC a day to avoid the KYC limit. In February 2019, a member of Binance’s compliance team even joked about Binance’s lax controls were inviting criminals to the platform’: “we need a banner ‘is washing drug money too hard these days - come to binance we got cake for you’”.

Binance also had an explicit internal policy, created by Lim on direction from CZ, to tip off VIP users when they had become the subject of a law enforcement inquriy. “contact the user through all available means (text, phone), to inform him/her that his account has been frozen or unfrozen. . . .We cannot in any circumstances directly tell the user to run/withdraw, we can get sued or undertake personal liability. Giving a strong hint[,] such as your account is unlocked/your account has been investigated by XXX is usually a good enough hint of severity.” “If the user is a big trader, or a smart one, he/she will get the hint.”

When some accounts were flagged to Binance as being associated with ISIS and Hamas, Lim instructed employees to first check if they were VIP accounts. If so, he said: “[o]ffboard the user but let him take his funds and leave. Tell him that third party compliance tools flagged him.”” In another instance, after being informed of “HAMAS transactions” on Binance, Lim explained that terrorists tend to avoid sending large amounts of money. “can barely buy an AK47 with 600 bucks”, the employee replied. At a later point, discussing customers from Russia, Lim remarked, “Like come on. They are here for crime.” Binance’s Money Laundering Reporting Officer agreed, “we see the bad, but we close 2 eyes.”

Binance also knew about customers who were either sending money to or receiving money from marketplaces that sold child sexual abuse material. Although they shut down some of those customers’ accounts, they never filed any suspicious activity reports.

Tai Chi entity

In late 2018, feeling the heat, Binance hired a consultant to advise them on the legal risk they were facing in the United States. The consultant went to great detail on the regulations that Binance needed to be following in the United States (but wasn’t), and then offered three possible strategies: a “low-risk” option in which Binance would become fully compliant with the US, a “high-risk” option in which Binance would continue as it had been, and a “medium-risk” option. Binance made it seem as though they rejected the consultant’s recommendations, but in reality, they would ultimately go on to follow the “medium risk” strategy very closely.

This “medium risk” plan involved creating what the consultant called a “Tai Chi entity” — a reference to the Chinese martial art that emphasizes not using force against force, but instead strategically redirecting an opponent’s force away or back towards them. This entity, he said, would “insulate Binance from legacy and future liabilities” by becoming “the target of all built-up enforcement actions”. He also recommended several actions Binance could take, which would be “just for publicity”, including begin discussions with the US SEC “with no expectation of success and solely to pause potential enforcement actions”.

Establishment of Binance US

In keeping with that plan, Binance announced in mid-2019 that they would be blocking users from the United States, and would launch a separate exchange for the US market.

Quick clarifying point: Going forward in this video, you’ll hear me refer to “Binance”, “Binance.com”, or “Binance global”. When I say that, I’m referring to the primary, global Binance exchange, run by CZ, and not Binance US.

The Tai Chi consultant was brought back, and helped with the development of the new exchange for several months. Several months later, under an entity called BAM Trading, Binance launched Binance US. Binance US would go on to become one of the top five crypto exchanges in the United States.

They were very careful about messaging, because they didn’t want to publicly admit that they had ever had US customers on the global exchange. Internally, in a meeting where he also described Binance.com’s substantial US customer base, CZ talked about how to announce the US exchange’s launch. “We need to finesse the message a little bit,” he said. “The message is never about Binance blocking US users, because our public stance is we never had any US users. So, we never targeted the US. We never had US users.”

Binance US appeared to do everything by the book: at the time of its launch, the exchange listed only seven cryptocurrencies at the time of their launch, compared to the more than one hundred tokens listed on Binance.com. This was an apparent attempt to placate the US SEC, which is watchful for exchanges listing tokens it believes to be securities, though Binance US would ultimately list more than 150 tokens. Binance US doesn’t offer trading in crypto derivatives, a riskier type of instrument that the US CFTC doesn’t want exchanges offering to retail customers. And they registered the new US exchange as a money services business, and obtained state money transmitting licenses.

In order to further distance themselves from the entity, Binance and its executives were extremely careful to describe Binance US as a “partner”, not a subsidiary. However, despite having its own executive team on paper, it was controlled by CZ, who also was the beneficial owner of the company. These executives and other employees didn’t even have full visibility into the trading data of the exchange they were supposedly running. They had no control over their own bank accounts, and had to get approval from CZ for even routine expenses. Binance would occasionally transfer tens of millions of dollars out of Binance US without the CEO, Catherine Coley, even knowing about it. When CZ directed that Binance US list the BNB token in September 2019, Coley balked because it was likely to be deemed a security by the SEC. CZ “brought Coley to the room to strongarm a [BNB] listing”, and it was listed the same month. Coley ultimately launched what she called “Project 1776” in late 2020 to try to gain independence from the global exchange and CZ, which she called the “mothership”.

While working on this, Forbes published an article revealing the existence of the Tai Chi plan, which Coley said had destroyed trust among employees of the US exchange who felt “like they’ve been duped into being a puppet”. Binance quickly sued Forbes and the two authors of the article for defamation, seeking damages and the deletion of the article, though they dropped the suit a few months later. Days after dismissing the lawsuit, Binance made a show of power by investing $200 million into Forbes.

As for Project 1776, CZ fired Coley only some months after she embarked on the campaign. CZ installed a new CEO, who resigned only three months after taking the position when it “became clear to [him] at a certain point [that] CZ was the CEO of BAM Trading, not me”.

Keeping US customers on the exchange

Despite their public statements about blocking US customers and limiting them to the no-fun-allowed US exchange, the reality was very different. Binance wanted US customers — especially those who were doing high volumes of trading and were very profitable for Binance — to keep using the global exchange where they had access to a wider range of products. They accomplished this through a combination of willful ignorance and knowingly helping customers — especially VIPs — circumvent their own supposed restrictions.

When talking about showing a pop-up to redirect users with US IP addresses away from Binance towards Binance US, CZ said, “We need to word [the popup] very carefully so that we let people know what they need to do, including using a VPN, without explicitly stating it.” Samuel Lim later told another employee that, “If US users get on .com, we become subjected to the following US regulators, fincen ofac and SEC…” “we try to ask our US users to use VPN / or ask them to provide (if [they] are an entity) non-US documents / On the surface we cannot be seen to have US users but in reality, we should get them through other creative means.”

Ultimately, the pop-up was just a pinky swear: it asked people to self-certify that they were not a US person.

In calls during June 2019, as Binance was planning to launch the US exchange, Yi He told CZ and other executives that Binance had at least 3,500 VIP accounts based in the US, and that those US-based VIPs accounted for around 25% of Binance’s trading revenue. CZ really didn’t want to lose these users, so he spoke of “achiev[ing] a reduction in our own losses” while ensuring that “U.S. supervision agencies not cause us any troubles” by making “US users slowly turn into other users”. Binance “cannot say this publicly, of course”, he said. “We do need to let users know that they can change their KYC on Binance.com and continue to use it. But the message, the message needs to be finessed very carefully because whatever we send will be public. We cannot be held accountable for it.”

Binance employees began a campaign in which they contacted US VIP customers — on the phone, not in writing — to inform them that Binance had “misidentified” their accounts as belonging to US customers, and asking them to “correct” the “previously inaccurate records”. CZ explained on a call with other executives, “We cannot say they are US users and we want to help them. We say we mis-categorized them as US users, but actually they are not.” Samuel Lim added: “We cannot advise our users to change their KYC. That’s of course against the law… But what we can tell them is through our internal monitoring, we realize that your account exhibits qualities which makes us believe it is a US account.” This, he acknowledged, was “intentional circumvention of KYC”.

In chat conversations, Lim also spoke about giving “special treatment” to US VIPs who were “doing sick ass volumes”.

Documents were drafted to coach employees on having these conversations with the US VIP customers. For those who were suspected to be based in the US based on their IP addresses, employees were told to inform them that it was their IP address preventing them from using the exchange. “If the user doesn’t get the hint, indicate that IP is the sole reason why he/she can’t use .com.” They were told they couldn’t “explicitly instruct user to use different Ip. We cannot teach users how to circumvent controls. If they figure it out on their own, its fine.”

“Make sure to inform user to keep this confidential,” the coaching document stated. Some employees went even further, using fake names for these conversations, out of fear that the strategy might leak and the company could be pressured to fire them.

These VIP customers were coached to create offshore entities, if they didn’t already have them, and then update their KYC information to reflect a basis of operations there. In some cases, Binance just changed how they defined “US user” so it wouldn’t apply, and adjusted their automated geofencing controls to not apply.

By September 2020, an internal report showed around 16% of its total userbase was based in the United States. Around this time, Binance became very cautious about keeping records that they had US-based users on the global platform due to fear of “leak risk”, a fear that seemed to have been amplified by US regulatory action against BitMex. The next month, at CZ’s direction, Binance simply changed the label on this report to “unknown”. Around the same time, CZ rebuked an employee for posting US data in an internal group chat, instructing he delete the message. CZ also told an employee who told him about a US trading firm that was accessing the global platform, “[g]ive them a heads up to ensure they don’t connect from a us IP [address]. Don’t leave anything in writing.” [CFTC has screenshots] Binance employees started to only discuss US matters on Signal, where some chats had auto-delete functionality enabled.

Despite the concern about connecting from US IP addresses, even the programs that were intended to detect that were incredibly flawed. “I HAZ NO CONFIDENCE IN OUR GEOFENCING”, an employee told Lim in November 2020.

In October 2020, Binance had to hire an auditor to demonstrate to a US-based business partner, Paxos, that it had an effective compliance program. Lim stated internally that they found an auditor who would “just do a half assed individual sub audit on geo[fencing]” to “buy us more time.” Binance’s Money Laundering Reporting Officer complained that she “need[ed] to write a fake annual MLRO report to Binance board of directors wtf.”

Merit Peak, Sigma Chain

So, by this point I’ve talked a lot about customers trading on the Binance exchange. But I haven’t yet gotten into Binance’s own trading. Although Binance didn’t disclose to customers that they were trading on their own platform, they actually operated around 300 “house accounts” ultimately owned by CZ, including some operated by two trading firms he owns. In addition to Binance and Binance US, CZ also owns a two cryptocurrency trading firms, incorporated in early 2019, called Sigma Chain and Merit Peak. Both firms were only nominally independent from Binance — CZ owned them, and Binance employees were in charge of their operations.

Why does a cryptocurrency exchange operating an only nominally independent trading firm ring a bell?

Both Sigma Chain and Merit Peak operated as market makers for Binance on both the US and global exchanges. If you’re running an exchange, the simplest description of your business is that you match people who want to buy an asset with those who want to sell that asset. But what if someone wants to buy or sell an asset and there’s no one around who wants to make the opposite trade? Exchanges solve this problem by engaging “market makers”, which are typically large trading firms who will step in on the other side of trades to make sure there is adequate liquidity within the markets.

There is substantial conflict of interest risk when it comes to operating both an exchange and a market maker, which why such activities are required by US securities laws to be carefully separated. But CZ’s firms simply flouted these regulations, which are designed to keep firms from trading against their own customers.

And that’s exactly what they did. From the moment of Binance US’s launch, Sigma Chain engaged in extensive wash trading, which is when an entity trades assets among accounts it secretly controls in order to artificially manipulate that asset’s price. The wash trading by CZ and his firms was beneficial to him and those firms, at the expense of the other traders on the platform.

The very day Binance US opened, wash trading between accounts operated by CZ, senior Binance employees, and Sigma Chain constituted more than 99% of the initial hour of trading for one crypto asset, and 70% for the full day.

When Binance US would list a new crypto token, Sigma Chain wash traded it. In a six-month period in 2022, Sigma Chain wash traded newly listed tokens in 48 of 51 cases. Even tokens that had been on the platform for a while were heavily wash traded, including in a spike of wash trading leading up to Binance US raising a funding round, which appears intended to juice trading numbers to make the platform look more appealing to those prospective investors.

But even while he was engaging in this blatant and widespread wash trading, CZ and other Binance employees were talking up just how important it was that exchanges control against market manipulation and claiming that Binance did so.

In April 2019, upset that Binance was appearing lower on a list of crypto exchanges by volume than he believed was accurate, CZ tweeted: “CREDIBILITY is the most important asset for any exchange! If an exchange fakes their volumes, would you trust them with your funds?” What he didn’t mention was that his very own firms were doing that exact thing.

Meanwhile, Binance US was claiming both to the public and to prospective investors that they were carefully monitoring trading for manipulative behaviors and made claims about their trading volume without disclosing the massive wash trading.

Despite these claims, an employee would tell Coley over a year later: “[a]pparently we have nothing in place to prevent wash trading? Just tested myself, sold market order into my own bid.” Another employee replied: “Yikes.”

The wash trading wasn’t the only problem with these entities, though. Massive amounts of Binance money was flowing to and from Sigma Chain and Merit Peak, including between the global and US entities. Customer money, investor money, and company money was all commingled in these accounts to the tune of billions of dollars.

This wash trading of crypto assets, commingling, and lack of disclosures would later raise alarms at the US SEC, but it was hardly the only issue on the agency’s radar. Neither Binance global nor Binance US registered with the SEC as an exchange, broker-dealer, or clearing agency despite apparently filling all of those roles (roles that would normally be separated). Furthermore, they listed tokens — including their own BNB token — that looked a whole lot like unregistered securities. They also offered staking services, programs that the SEC cracked down on hard in the US in 2023. Binance employees knew that they were risking enforcement actions from the SEC: all the way back in 2018, Lim bluntly stated to another member of the compliance team: “We are operating as a fking unlicensed securities exchange in the USA bro.”

Complaints

For years, rumors swirled of a Department of Justice investigation into Binance and CZ. CZ seemed increasingly reticent to leave the United Arab Emirates, which does not have a formal extradition treaty with the United States. In 2021, when his father passed away, CZ didn’t travel to Canada to the funeral (though Binance would later claim he had). Sam Bankman-Fried joked on Twitter in 2022 that CZ might not be “allowed” in the United States.

However, it would ultimately be the US CFTC to come down on Binance first. In March 2023, they charged Binance entities, CZ, and Samuel Lim with seven violations of the Commodity Exchange Act. Although the CFTC is only able to file civil complaints, which can result in injuctions from operating and potential fines but no jail time, a lot of the behavior described in the complaint sounded really criminal. Lim would later settle his portion of the CFTC complaint by paying a $1.5 million fine.

Binance was defiant, and published a long statement by CZ describing his “disappointment” in the lawsuit “despite our working cooperatively with the CFTC for over two years.” “In this journey towards freedom of money, we do not expect everything to be easy. We do not shy away from challenges.”

Only two months after the CFTC lawsuit, the SEC followed up with their own complaint, which included thirteen charges against Binance entities and CZ personally. The charges encompassed the wash trading, commingling of assets, cryptocurrency staking, and operating without registration. Notably, the SEC also used the lawsuit to describe a whole lot of popular cryptocurrency tokens as securities, something that could have a massive impact on cryptocurrency industry in the United States if upheld in court. Robinhood, eToro, and Bakkt all acted quickly to delist the tokens for US customers, cautious of also being accused of offering unregistered tokens.

The SEC also applied for, and was granted, an emergency temporary restraining order aimed at preventing CZ and Binance from transferring assets out of the United States. According to former SEC enforcement attorney John Reed Stark, a TRO is “the most powerful tool the SEC has…” “used sparingly,” and reserved only for “really bad situation[s]”.

Binance, again, was defiant, accusing the SEC of “regulat[ing] with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology”.

In the months after the CFTC and SEC lawsuits, Binance suffered misfortune after misfortune. Regulatory action from various jurisdictions caused them to exit or dramatically cut back operations in jurisdictions including Australia, Belgium, Canada, Cyprus, the Netherlands, and the United Kingdom. A seemingly neverending train of executives and other high-level employees quit, including the US Head of Legal and US Chief Risk Officers — a bad sign. Both Binance global and Binance US performed substantial layoffs.

But throughout it all, CZ remained defiant, lashing out on Twitter at the media and dismissing reports as “FUD”.

That is, until November 21.

The charges

That was the day the Justice Department announced that Binance had agreed to plead guilty to three charges, pay $4.3 billion in penalties, and submit to comprehensive monitoring to ensure that their compliance programs were finally properly implemented. Simultaneously, CZ pleaded guilty to one felony charge, resigned as CEO of Binance, and agreed to pay a $50 million fine. Sentencing is scheduled for late February, and it’s entirely possible that he will have to do prison time.

Why

This was a surprise. For one, despite the recordbreaking fine, it seemed somewhat lighthanded by the DOJ, who could have pushed to take a case to trial. It was also a surprise that CZ voluntarily showed up in Seattle to enter a guilty plea after years of appearing to avoid the grasp of US law enforcement, and that he stepped down from the company that had become an extension of himself seemingly without much of a fight.

It may be that CZ decided that the likely consequences were an acceptable price for — eventually — being able to move freely again. It also seems that the net was beginning to tighten somewhat around CZ, particularly after an investigation into Binance began this past summer in France — a country that does have an extradition agreement with the UAE. Furthermore, the UAE has been looking to clean up its reputation and be removed from the Financial Action Task Force’s gray list, and CZ and Binance reportedly kept coming up in conversations between UAE officials and financial authorities in France and in the US.

The choice of action by the DOJ may have been out of that a more aggressive approach could topple the exchange, endangering the finances of its many direct customers and the far more people who would be impacted by the enormous impact a Binance collapse would have on the crypto industry and markets. The DOJ threw the book at Sam-Bankman Fried, sure, but the damage to FTX had already been done at that point. And more generally speaking, the DOJ usually tries to avoid putting companies out of business, a former US prosecutor told Wired.

It also could have been because Binance had a bargaining chip: information. With such a substantial global userbase and a known history of serving criminals, Binance is sitting on troves of data that must be irresistable to the justice department. Perhaps they weren’t willing to bet that they could force Binance to fork it over through the legal system, choosing instead to find ways to get access to that valuable data through a friendlier settlement.

Charge details

Now that we’ve touched on why the deal may have happened, let’s dig in to the charges and what they mean for Binance and CZ.

The DOJ filed a complaint naming Binance and CZ personally. CZ pleaded guilty to one charge: failure to maintain an effective anti-money laundering program. Binance the company pleaded guilty to three charges: conspiracy to conduct an unlicensed money transmitting business and to fail to maintain an effective anti-money laundering program, conducting an unlicensed money transmitting business, and violations of the International Emergency Economic powers Act, which prohibits causing transactions between US people and Iran. Binance was also required as a part of their plea to prohibit CZ from any present or future involvement in operating or managing the Binance business, though he is still — critically — the owner of the company.

In addition to their own charges, though, the DOJ invited some friends to the party. The resolution with the DOJ also involved settling the open complaint from the CFTC, who will collect $2.7 billion in penalties and disgorgement from Binance, and $150 million from CZ (towards which his $50 million DOJ fine will be credited). It also resolved ongoing actions by the Office of Foreign Assets Control, or OFAC, who is in charge of enforcing sanctions violations, and by the Financial Crimes Enforcement Network, or FinCEN, who as I mentioned earlier is responsible for enforcing the Bank Secrecy Act. Both agencies imposed their own fines and penalties, though some of the fines colleccted by the DOJ will go towards the FinCEN or OFAC settlements.

The question now becomes: does Binance have the cash they’ll need to pay these fines? There is a schedule that requires portions of the fine to be paid at different points, but ultimately Binance will have to cough up the whole amount within fifteen months of sentencing. Binance says they’re good for it, obviously, but are they? CZ seemed to try to dodge a question about whether they could pay several billion dollars about a year ago.

Binance discloses very little, and has no audited financials, so no one outside of the company can really say with certainty how much money they have. Binance claims to show “proof of reserves” on their website, which they say is real-time proof that they have sufficient assets backing their users’ holdings, but putting aside that proof of reserves are deeply flawed in terms of presenting a complete picture of a firm’s assets and liabilities, Binance’s claims only refer to customer assets and not corporate holdings.

Would Binance resort to dipping in to customer funds to pay the fines? An exodus of Binance customers has suggested that there are a good number of people who don’t intend to stick around to find out.

Arguably more onerous than the fines, though, are the monitorships that are being imposed, with Binance footing the bill. John Reed Stark, a former enforcement attorney at the SEC, has described the monitorship as a “24/7 365-days-a-year financial colonoscopy.” A US prosecutor told Wired that the monitorship was “kind of crazy… I don’t know what kind of business would want to operate while allowing that much government oversight.”

The DOJ has ordered Binance to become compliant with the applicable laws, and imposed a three-year-long monitorship to make sure that happens. Independently, FinCEN has also ordered a monitor to ensure Binance’s compliance with the Bank Secrecy Act, and that monitorship has a term of five years. Their monitorship will involve ensuring that all US users are gone from the global exchange, as well as digging into details around Binance’s Russian cryptocurrency exchange “partner” that looks kind of a lot like the kind of “partnership” Binance reportedly had with Binance US. These monitors, and the consultants they hire to conduct additional reviews, will be watching Binance like a hawk as they continue to operate AND going back through their past operations — news that I’m sure has struck terror into more than a few criminal operators.

Remember all of the suspicious activity reports Binance wasn’t filing? Well, FinCEN doesn’t intend to just shrug those off. Instead, the monitor will hire a consultant to do a formal suspicious activity report lookback, identifying where reports should have been filed and then filing reports pertaining to categories including ransomware, terrorist financing, high-risk jurisdictions, darknet markets and scams, and child sexual abuse material. According to that same US prosecutor, “it would be a game changer in taking down transnational syndicates doing evil deeds worldwide and trying to shield those crimes by using cryptocurrency to move money.” FinCEN says they think there are at least 100,000 suspicious activity reports that should have been filed, but weren’t.

Indeed, there’s some precedent for this type of retroactive inspection after criminal action. When US authorities took down BTC-e in 2017, criminals involved in child sexual abuse materials distribution and in the hacking of the Silk Road darknet marketplace were identified thanks to data seized by authorities.

Now, this may be a hot take here: The degree of data access by the US government as a result of this action is actually arguably overbroad, as they will now have access to user data with no requirement that the transactions raised suspicion, and no requirement that law enforcement demonstrate probable cause that that user was involved in illicit activity. Regardless of your opinions on the prevalence of crime in the crypto world, or of the likelihood a given crypto user is engaging in criminal activity, warrantless access to private data should be cause for concern.

What’s next for Binance

The question now is: what’s next for Binance? It remains to be seen whether they can pay the fine, though some knowledgeable commentators suspect the DOJ wouldn’t have imposed a fine the company couldn’t pay.

It also remains to be seen whether Binance will — or even can — follow through with its compliance promises under monitorship. I really can’t overstate just how onerous this kind of program is. A former Wells Fargo executive who was in charge of their financial crimes risk management program told Ben Penn at Bloomberg Law: “There has been nothing remotely close to this when it comes to complexity, length, scope”—and to monitor what was “a criminal enterprise, essentially.” Penn drew comparisons to the HSBC monitorship, which was imposed after they were found to have laundered drug money for Mexican cartels. HSBC’s monitorship was supposed to last for five years, but was ultimately extended to almost ten after the independent montiors discovered multiple failings.

In Binance’s case, somehow, this monitor has to assemble a team that can probe the workings of a company that has been designed to be deliberately opaque and resistant to law enforcement inquiry, while also satisfying the expectations of financial regulators who don’t want to be seen to be giving Binance a pass.

And even in a best case scenario, where Binance is able to become fully compliant with the laws it was supposed to have been following all along, can Binance survive? Part of the reason cryptocurrency companies are profitable is by skirting regulations. A profitable business case for a fully regulated, fully compliant cryptocurrency exchange is not clear to me, despite the claims of companies like Coinbase. CZ explicitly stated internally that he was so hesitant to register and comply with US regulations because it would likely touch off a dramatic reduction in customers and, thus, profits.

And history does not offer a promising outlook for crypto exchanges that operated outside of the law and then tried to shape up. Poloniex was a cryptocurrency exchange known as an anything-goes operation, where its lack of KYC was a selling point. It was “shitcoin casino numero uno”, according to a former employee, who described it as “completely Wild West”. In 2018, the US-based cryptocurrency company Circle purchased the exchange with the idea of cleaning things up and making it into an above-board, US-regulated exchange. They discovered, however, that when they introduced KYC, both customers and trading volume vanished. They gave up on the idea very quickly, and sold the exchange in 2019 to Justin Sun, who moved it to the Seychelles and returned it to its “YOLO Polo” roots.

If Binance fails to truly comply with US regulations and its new monitorship requirements, or if Binance otherwise fails to comply with the conditions of its plea agreement, all bets are off: the DOJ could come after the company and its executives criminally, far more harshly than they already have, and the DOJ and other financial agencies could seek to end the company’s presence within the United States.

And Binance has already raised some eyebrows as far as its attitude towards this supposed new, above-board era in its history. During his very first public interview as the replacement CEO of Binance, the former Abu Dhabi regulator Richard Teng was evasive in his answers to even the most basic questions. “I’ve asked you where Binance’s global headquarters is, I’ve asked you whether Binance is going to undergo an audit, how many employees the company currently has on its books and whether you’re applying for a license in the UK, which is what Binance told us during our last FT crypto conference. You haven’t answered those questions,” stated a frustrated interviewer at a conference hosted by the Financial Times. Teng ultimately snapped back, “why do you feel so entitled to those answers?”

For CZ

As for CZ, his future is also unclear. After pleading guilty to his felony charge, he was going to return to his home in Dubai until the sentencing hearing scheduled for February. However, prosecutors appealed the judge’s decision not to include a travel restriction in his bond conditions, and ultimately the judge decided that he was a flight risk who would need to remain within the United States until sentencing.

His charge comes with a maximum ten-year sentence, although sentencing guidelines would put him at a recommended 15–21 month term of imprisonment. However, these guidelines are truly only guidelines — there’s nothing to stop the government from trying to seek a maximum sentence, and his plea agreement allows prosecutors to include evidence of additional crimes that were not ultimately charged against him thanks to his cooperation when providing materials for a pre-sentencing report, which is used to determine an ultimate sentence. On the flip side, CZ could also face lighter treatment than the sentencing guideline, and could even end up with probation or house arrest — though this would likely be somewhat politically unpopular given the sentiment towards cryptocurrency crimes and the apparent scale of wrongdoing at Binance under CZ’s leadership.

As for CZ’s willingness to abide by the terms of his plea agreement, well, he seems to be testing the waters as well, particularly when it comes to the part that prohibits him from publicly denying the wrongdoing he just admitted to. In a long message on Twitter where he wrote “I made mistakes, and I must take responsibility,” he proceeded to do nothing of the sort, finishing the post with “On that note, I am proud to point out that in our resolutions with the U.S. agencies they: do not allege that Binance misappropriated any user funds, and do not allege that Binance engaged in any market manipulation.”

Fortunately for CZ and the future of his plea agreement, he was careful to ensure that this statement was technically correct, if also somewhat misleading. It relies on the fact that allegations of misappropriation of user funds and market manipulation came from the SEC — the one agency that did not join the group settlement spearheaded by the DOJ.

As for the SEC charge, well, that is plowing ahead with full force. In fact, the SEC has already filed notice of supplemental authority in that case, attaching Binance and Zhao’s plea agreements and the consent order from FinCEN. The admissions made in those agreements could dramatically bolster the SEC’s case against the company, which could result in hefty fines and injuctions — though the SEC, like the CFTC, does not have criminal authority.

I wish I could end this video with a confident prediction of what the future holds for Binance, and the crypto industry where it has been a dominant force for more than five years, but it’s pretty early to be doing such things, and I learned long ago that what happens in the crypto industry will almost always be more absurd and unbelievable than anything I predict.

Instead, I hope I have left you with a full understanding of what has happened up to this point, with which you are certainly free to make your own predictions — leave a comment if you want. With that knowledge, we can watch what the future will bring together. Don’t forget to buy some popcorn.

Thanks so much for watching! This was my first longform video, and I really hope you’ve enjoyed it. I’m super new to writing, recording, and editing video, so please leave me any feedback you have! And if there are any topics you want to see me cover, either in video form or in my usual writing, please feel free to suggest those as well. If you liked this video, you should check out my writing over at the Citation Needed newsletter, where I publish regular writings about cryptocurrency industry and tech more broadly. I also do a roughly weekly recap of what’s been happening in the cryptocurrency world, so if you’re looking to stay informed on what happens with Binance going forward, consider signing up for a subscription. All content there is free, but I rely on the paid subscriptions to be able to do this kind of work — including this video — fulltime. If you want to support my work without a newsletter subscription, you can also check out mollywhite.net/support for some alternatives.

Again, thanks so much for watching, and stay tuned for more videos like this.

Attribution and sourcing

Annotated: Sam Bankman-Fried’s “FTX Pre-Mortem Overview”

2023-01-23T00:00:00+00:00

Sam Bankman-Fried has apparently decided to fill his time spent confined to his parents’ Palo Alto home with blogging, perhaps in the hopes that he can just blog his way out of the massive criminal and civil penalties he’s facing.

Although many of his statements here repeat things he’s said elsewhere, I think it is useful to be able to analyze some of the story he’s trying to spin all in one place, rather than cobbling his narrative together from multiple sources.

It’s remarkable the extent to which SBF outright lies, or at the very least twists his version of events to distort reality in his favor. I don’t intend to annotate further posts from him—which I suspect will be many—but instead hope that this will be sufficient to give some idea of just how thoroughly misleading these statements are.

Annotated: Sam Bankman-Fried’s “FTX Pre-Mortem Overview”

Livetweets of the December 14, 2022 Senate Banking Committee hearing on FTX

2022-12-14T00:00:00+00:00

Here's an easier-to-follow version of my tweet thread of the December 14, 2022 Senate Committee on Banking, Housing, and Urban Affairs hearing on the FTX collapse.

I also recapped this hearing in an issue of my newsletter.

10:01am

The FTX hearing by the Senate Committee on Banking, Housing, and Urban Affairs is beginning shortly. I'll be livetweeting it here, and will be publishing a recap of it in my newsletter later.

Hearing stream (YouTube)

10:01am

I'll use the #FTXhearing hashtag throughout, so feel free to filter it out if I'm clogging your feed or you'd rather catch up later.

Statements by witnesses—Prof. Hilary Allen, Kevin O'Leary, Jennifer J. Schulp, and Ben McKenzie—have already been published at the link above.

10:07am

Sen. Brown (D-OH) opens with a very critical statement, where he talks about Facebook's Libra project (shut down by gov't.) which he describes as a "shiny tool" to try to extract money from consumers

10:08am

"Crypto doesn't get a free pass because it's shiny and bright, or because venture capitalists think it might change the world." – Sen. Brown

10:11am

Brown urges that this hearing is not just about FTX, but will focus on the crypto industry and consumer protection.

10:17am

Sen. Toomey (R-PA) says largely the opposite to Brown, and echoes the crypto industry's line that we must separate FTX's wrongdoing from all this promise that supposedly exists in the industry.

"There's nothing intrinsically good or evil about software, it's about what people do with it... Code committed no crime..." – Sen. Toomey

[sigh]

10:18am

Toomey says some Senators have suggested "pausing cryptocurrency" while hearings go on.

10:18am

The crypto industry clearly has a strong spokesperson and salesman in Senator Toomey.

10:21am

Sen. Brown introduces the witnesses. Prof. Hilary Allen and Ben McKenzie Schenkkan (better known as Ben McKenzie) will be critical of crypto; Kevin O'Leary and Jennifer Schulp are both pro-crypto.

10:23am, 10:24am

First up is Professor Hilary Allen. Her statement is challenging crypto's claims they are decentralized. She has suggested that "a ban on crypto would be the most straightforward".

She says that if legislators are not willing to proceed with a ban, then they must be very careful not to enact laws that would make crypto "too big to fail".

10:26am, 10:28am,10:28am, 10:29am

Now Kevin O'Leary (note the laser eyes in the PFP) is up. He was a paid spokesman of FTX. He's now listing his crypto entanglements, and talking them up 🙄

O'Leary echoing Toomey in his statements that Bitcoin "isn't a coin, it's software".

This is a recently popular argument, which seems to seek to lean on "code as speech" precedence.

O'Leary explaining how HE will be the one to do the detective work on what happened at FTX.

He characterizes skeptics as "entrenched businesses" who "abhor competition".

10:32am, 10:36am, 10:37am

Now Jennifer J. Schulp, who's in camp "this is an FTX problem, not a crypto problem". She's talking up defi.

She characterizes various regulatory suggestions from the crypto-critical as "taking technological choices out of people's hands."

"Risk is a natural component of markets, and failure is often necessary for development."

10:38am, 10:39am, 10:41am

Now Ben McKenzie, who says the crypto industry depends on "misinformation, hype, and, yes, fraud".

McKenzie is outlining how he does not believe that cryptocurrencies are currencies, and how he believes that every cryptocurrency is a security.

"In my opinion, the cryptocurrency industry represents the largest Ponzi scheme in history."

10:42am

Sen. Brown asks if this kind of fraud exists at other crypto firms.

Allen: Yes

O'Leary: Yes, at unregulated exchanges

Schulp: Most likely

McKenzie: It's endemic.

10:46am

McKenzie outlining the cross-pollination between execs at online gambling and fraud enterprise Ultimate Bets and the crypto industry: Stuart Hoegner at Tether and Dan Friedberg at FTX

10:47am

O'Leary not great at yes or no questions. He claims the comparison to gambling are outdated and like early comparisons of the stock market to gambling.

10:48am, 10:48am

Sen. Toomey pushing back on McKenzie's claim that all cryptocurrencies—including Bitcoin—would be securities.

Not surprised there.

He's having Schulp make that argument for him.

The argument, a common one, is that Bitcoin is too decentralized to be classed as a security.

10:51am

O'Leary outlines the potential for blockchains, saying that 1/3 of the MIT class wants to work in the crypto industry.

Maybe not the best argument given that SBF was an MIT grad...

10:53am

O'Leary is blaming FTX's collapse on Changpeng Zhao (CZ) of Binance.

10:56am

Ben McKenzie's soul leaving his body while O'Leary talks

10:58am, 11:01am

Hilary Allen explains how "proof of reserves" and other crypto industry attestations don't replace proper auditing.<//p> Allen also says that arguments that crypto needs to be regulated completely differently from existing systems because "it's decentralized" doesn't hold water, and explains how the Bitcoin software and mining pools are highly centralized. </div>

Sen. Menendez (D-NJ) asks O'Leary if he might not have lost money if FTX had complied with existing regulations.

He says absolutely, but FTX wasn't regulated.

Compelling.

Sen. Menendez says he is worried about the extent to which crypto might be integrated with traditional finance, adding contagion risk

11:05am

Mendendez asks McKenzie how we could combat the advertising.

McKenzie says we should use the right terminology, classify cryptos as securities, possibly treat crypto as gambling and restrict advertising, and require disclosures.

11:07am, 11:07am, 11:08am

Sen. Tester (D-MT) opens with skepticism, asks Allen how her concerns expressed in front of the Senate last year have developed.

Allen expresses her gratefulness that banking regulators have largely siloed crypto, and limited FTX's explosion from affecting traditional finance.

But she expresses concerns over how crypto and traditional banking are increasingly intermingling, and she says we need to "firm up" the separation between the two.

"We have to think about how much of this we're willing to tolerate in the name of innovation."

11:09am, 11:10am

Allen explains how the subprime mortgage crisis exposure was around $1.3T, and the reduction in the crypto industry "market cap" (which she also expresses skepticism about) was on that order, so if crypto and tradfi had not been segregated, its failure could've been catastrophic.

Sen. Tester asks if, had the two been closely coupled, the government might have had to bail out crypto like it had to bail out banks in 2008. Allen says yes.

11:12am

O'Leary points to LedgerX as the "only entity that didn't go to zero" in the FTX collapse as proof that proper regulation could have protected FTX investors.

He conveniently ignores the other US-based entities involved the bankruptcy.

11:13am

Sen. Hagerty (R-TN) is concerned about a "similar implosion by Binance", which he says would be catastrophic for the crypto industry and for consumers. Asks how US regulators could work with global regulators to bring transparency to Binance.

O'Leary: "In one phone call we could solve this problem"

my god, he's done it

11:18am

Sen. Hagerty outlines ties he believes exist between Binance and the CCP, seems very concerned about that. Schulp decides to sidestep discussing those ties.

11:21am

Sen. Warner (D-VA) is up. He's also concerned Binance and possible ties to the CCP.

Talks about the "clunkiness" of Bitcoin, lack of scalability, environmental cost.

11:21am

Warner worries that "FTX is just the tip of the iceberg".

You and me both, my man.

11:23am

Allen says we're sort of partway down the iceberg, points to the earlier Terra/Luna collapse.

11:25am

McKenzie points out the existence of the "Exchange coordination" Signal chat which included both CZ of Binance and SBF of FTX, describes it as an example of centralization in the industry.

11:25am

McKenzie making sure to raise his concerns about the connections between Alameda and Tether.

11:27am, 11:29am, 11:29am

Sen. Lummis (R-WY) is up. She's been among of the biggest crypto advocates in the Senate.

"Digital assets are not on trial. Fraud and organizations are on trial. Let's separate digital assets from corrupt organizations."

She namedrops Kraken, Coinbase, and Bitstamp as shining stars of the crypto exchange industry.

Wonder how those donations are looking.

11:30am, 11:32am

Her first question might as well come from a talking Bitcoin.

Lummis: "Why do digital assets and DLT have the power to make our capital markets safer and more efficient?"

Shamelessly plugs her and Gillibrand's bill, the "Responsible Financial Innovation Act", which she says she'll reintroduce next year.

11:32am

Sen. Warren (D-MA) is up. Hold on to your butts, this is going to be a stark difference from Lummis.

11:34am, 11:34am

Warren characterizes crypto as a tool for crime. She asks Allen about claims from the crypto industry that blockchains are uniquely transparent. "Does the fact that the blockchain is public mean it is more difficult for criminals to launder money using crypto?"

Allen explains that blockchains are "the worst of both worlds", and enable criminals to launder money while also making it difficult for average people to maintain privacy.

11:36am

Allen explains that the claims that crypto could be more efficient, made by Schulp but also many others, rely on crypto sidestepping regulations on things like anti-money laundering. She describes crypto as "regulatory arbitrage".

11:36am

Warren asks O'Leary if we should accept weaker KYC/AML in crypto because it is "so promising". He says no.

11:38am

O'Leary: "I take issue, Senator, with your concept that it makes it easier to do money laundering. Currencies have been used for drug trafficking since the 60s."

wat

11:38am

Argues that "USD is used for money laundering too". Warren isn't having it, saying yes—that's why the same rules should apply to crypto as to traditional finance.

"No!" - O'Leary

11:42am, 11:42am

Sen. Van Hollen (D-MD) asks Allen what she would do if she was queen for a day.

Allen: "If I were queen for a day I would ban it. But if I was someone who was dealing with multiple constituencies..." she would strengthen banking law and prevent banks from touching crypto. Give SEC more money. Pass legislation classing all cryptos as securities.

11:45am, 11:46am

Sen. Cortez Masto (D-NV) asks how we would regulate crypto.

O'Leary objects to Allen's suggestion that we ban banks from interacting with crypto, says it would "make US banks the most uncompetitive financial services industry in the world".

O'Leary starts to shill crypto, Cortez Masto cuts him off (thank god)

11:46am

"If we allow crypto to infect our banking system, we will be back here, and not in a good way." - Ben McKenzie

11:47am

Cortez Masto asks about the claims that this was an issue of centralization not crypto, asks if defi would've helped.

Allen states that defi is a marketing term, it's not very decentralized.

11:48am

Allen distinguishes decentralization of networks from decentralization of power and economic decentralization.

Louder for the people in the back!

11:50am

Sen. Smith (D-MN) characterizes FTX collapse as shocking but not surprising.

Says people should be allowed to invest however they like, but they should be able to trust that the market is fair and have transparency.

11:54am

Smith outlines externalities of crypto mining, speaking of proof of work mining (used for Bitcoin and some others). Describes energy & pollution impact.

"The technology is bad." - Ben McKenzie

11:56am

Sen. Sinema (something-AZ) is up now. She's another huge crypto promoter, and is talking up crypto's appeal to those skeptical of governments and centralized control.

11:58am

Sinema refers to Prof. Allen as "him". Did she just now start listening?

11:58am, 11:58am

Sinema is challenging Allen's and others' statements to "let [crypto] burn", saying they're advocating for burning average retail investors.

🙄

Sinema ostensibly asked Allen a question, but she's just grandstanding.

12:02pm

Sen. Toomey is back and shilling. "We haven't talked as much as we ought to about some of the, I think, really exciting and terrific applications that the crypto ecosystem makes possible".

12:05pm

Sen. Brown talks about "regulatory clarity", asks if crypto platforms could even comply with regulations if that had the clarity.

Allen says no.

12:05pm

And with that, the hearing is over.

Livetweets of the December 13, 2022 House Financial Services Committee hearing on FTX

2022-12-13T00:00:00+00:00

Here's an easier-to-follow version of my tweet thread of the December 13, 2022 House Financial Services Committee hearing on the FTX collapse.

I also recapped this hearing in an issue of my newsletter.

9:39am

The FTX hearing by the House Committee on Financial Services starts in about twenty minutes. I'll be livetweeting it here, and will be publishing a recap of it in my newsletter later.

Hearing stream

10:21am

Rep. Patrick McHenry (R-NC, recipient of FTX donations) says he is disappointed to not have Sam Bankman-Fried testifying today, because he wanted to "hear his lies here, on the record, under oath".

10:23am

McHenry parroting the "a few bad apples" crypto industry talking point: "We have to separate out the bad actions of an individual from the good created by an industry and an innovation."

10:24am

New FTX CEO John J. Ray III is giving his statement. This was published online last night, and I have a thread on it here.

10:30am

Rep. Waters (D-CA) asks Ray if there is evidence that SBF tried to hide links between Alameda and FTX, and if there was any independent governance.

Ray says there was no segregation or independent governance, and Alameda, FTX, etc. were operated "as one company".

10:31am

Ray answers a question about loans to SBF: poor documentation of loans, "in one instance he signed as both the issuer of the loan as well as the recipient of the loan". They have no information as to the purpose of use of the loaned funds at this point.

10:38am

McHenry questioning Ray on distinctions between FTX.com and FTX.us.

"There was a public distinction between the two," but crypto assets were stored together.

10:41am

Ray says he's not concerned about the cross-jurisdictional nature of this bankruptcy, and confident that various jurisdictions will cooperate.

10:47am

Ray just said that FTX used QuickBooks for recordkeeping. "A multibillion dollar using QuickBooks!"

10:51am, 10:52am

Rep. Sherman's (D-CA) turn. He has not been quiet in the past about his distaste for crypto.

"My fear is that we'll view Sam Bankman-Fried as just one big snake in a crypto garden of Eden. The fact is, crypto is a garden of snakes."

Sherman urges his colleagues, "don't trash Mr. Bankman-Fried and then pass his bill!" and points to significant crypto lobbying influence on the House. Sherman is referring to the DCCPA.

11:00am

Sherman also introduces into the record the letter from his colleagues to the SEC earlier this year, in which they urged the SEC to back off on crypto.

(see "The Eight Congressmen Subverting the SEC’s Crypto Investigation", The American Prospect.)

11:00am

Sherman asks if Ray will turn over evidence of loans from the FTX businesses that may have been used for disguised campaign finance contributions. Ray confirms he will.

11:02am, 11:04am

Rep. Green (D-TX) points to SBF's academic background, and asks if it's possible that "all of this is just one big mistake", as SBF has been trying to portray it.

Ray says he is hesitant to cast judgment at this time, while they are still digging through records.

"Others will judge him by his actions," says Ray.

Green thinks this is "more than sincere ignorance and conscientious stupidity".

Indeed.

11:08am

Rep. Sessions (R-TX) is asking about whether the SEC was engaged with FTX, and is inquiring about information submitted to the IRS.

11:12am

Rep. Cleaver (D-MO) describes SBF's ~~submitted~~ statement as "so disrespectful."

He reads, "'I would like to start out by formally stating under oath...' I can't even say it publicly. Absolutely insulting."

SBF was going to say "fuckup" in Congress, huh

(SBF's draft statement was leaked to press. A correction to the above tweet: it was never formally submitted to Congress.)

11:14am

"The bank situation should have been a real red flag," says Ray, in response to Rep. Luetkemeyer's (R-MO) question about FTX's early inability to get bank accounts.

11:17am, 11:17am, 11:19am

Leutkemeyer is the first to ask about Moonstone Bank (fka Farmington State Bank), a bank with $5.7M net worth, into which Alameda invested $11.5M to acquire ~10% ownership.

Good question!

Ray is looking into it, but doesn't seem to have much to say on it at this point.

See Protos' reporting for more on this very weird situation.

Leutkemeyer asks if there could be money laundering going on, or if FTX execs were using it to hide money.

Ray again doesn't say anything specific, but acknowledges "It's highly irregular".

11:22am

Rep. Perlmutter (D-CO) asks if dogecoin is pronounced "doe-gee-coin" or "doggycoin". Someone helps him out. "Oh, dohj-coin!"

11:24am

Rep. Waters enters into the record the three criminal filings against SBF, from the DOJ (SDNY), SEC, and CFTC.

11:25am

Rep. Huizenga (R-MI) asks if Ray has been sharing findings with the SDNY or the SEC.

Ray confirms he has.

11:26am

Huizenga asks about possible US users of FTX.com.

(US citizens are not supposed to be able to use FTX.com, and are instead relegated to FTX.us, which offers far fewer tokens for trading, has stricter limits on leverage, and has generally fewer features than its non-US regulated .com counterpart.)

Ray says there are somewhere on the order of hundreds. He says that those customers having billions of dollars on FTX.com is probably an overly high estimate.

11:27am

Ray says they haven't yet seen evidence of direct transfer of funds from FTX.us to Alameda, but they are very concerned about possible commingling of funds between FTX.com and FTX.us.

11:28am, 11:29am

Huizenga now asking about the possible involvement of SBF's parents in FTX.

Huizenga talks of a meeting he had with SBF last year, noting SBF was "at least fifteen minutes late" and accompanied by his father.

11:33am

Rep. Beatty (D-OH) asks how Alameda accessed client funds in direct violation of their own terms.

"There was no oversight," and executives could "move money around undetected" said Ray.

11:40am

Rep. Barr (R-KY) asks about an ESG ratings firm that gave FTX a higher rating for governance than Exxon-Mobil. He asks Ray, given his assessment of FTX governance, what would he say about that?

Ray: "I'd get my money back"

11:41am

Barr asks Ray to elaborate on why he doesn't think FTX's audits were reliable.

"Well, we've lost $8 billion, so by definition, I don't trust a single piece of paper in this organization."

11:45am

Rep. Vargas (D-CA) is repeatedly firing shots at his Republican colleagues for promoting crypto.

He tried to get Ray to say which regulatory agency he thinks should regulate crypto, but Ray declined to answer.

11:46am

Ray distinguishes the "sophisticated" crimes he observed at Enron, and the "old-fashioned embezzlement" that he has observed at FTX.

11:49am

Rep. San Nicolas (D-Guam) has two Dunkin iced coffee cups next to him. This Bostonian approves.

11:51am, 11:51am

Ray confirms FTX has lost "in excess of $7 billion".

He outlines how funds were taken from FTX and used by Alameda, who incurred trading losses.

Ray also describes how investments were made without any pro forma or valuation. "I'm really not quite sure how some of the purchase price numbers were derived, so it gives you a worry obviously that the purchases were overvalued."

11:54am, 11:54am

Rep. San Nicolas explains his line of questioning: "The FTX collapse right now is just FTX. But are these lack of controls, and are these environments that resulted in the FTX collapse still existing today? And could the same thing happen in similar operations, such as Binance for example? Could they also engage in the same activities under the current regulatory regime and, if things go wrong, have the same outcome?"

11:59am

Rep. Hill (R-AR) is a noted crypto advocate with an "A" rating from the "Crypto Action Network".

He repeats McHenry's "bad apples" description, and makes the tired argument about how "we don't throw out railroads" because of fraud in the 1800s.

12:00pm

Rep. Himes (D-CT) describes "a 30-year-old gazillionaire who raised billions of dollars living in some condo with a bunch of young people."

Pleased to report that the world "polycule" has not been yet been uttered in Congress today.

12:04pm, 12:05pm

Ray: "Crypto assets have inherently some difficulties. The assets can be taken or lost. We have assets that are in what are called hot wallets and those that are in cold wallets. Hot wallets are very vulnerable to hacking. If you've done any looking on the Internet you'll find that hacking is almost ordinary course in this business sector. Lots of vulnerability to the wallets."

If any Representative wants to know where to look on the Internet, have I got a site for you 😁

12:05pm

Ray speaks of specific failures at FTX: "Our keys aren't stored in a centralized location. We don't know where all of our wallets are. Passwords were sometimes kept in just plaintext format."

12:08pm

Rep. Emmer (R-MN, member of the blockchain eight, recipient of SBF-linked funds) is up. He's a huge crypto advocate, and is one of the "blockchain eight" who signed the letter urging the SEC to back off. He's recently been trying to pin the FTX collapse on SEC chair Gary Gensler.

12:10pm

Emmer is now accusing Gensler of refusing to answer questions or testify before the House FSC, and wants Ray to share any communications he has between FTX and Gensler. Ray confirms he will.

12:12pm

Emmer takes a moment to advertise crypto, and blame the collapse on centralization rather than crypto as a whole. 🙄

12:13pm

Emmer asked if there was a compliance department at FTX.

Ray: "There were people with titles."

12:17pm

Ray: "Alameda had almost a complete ability to lose money beyond their collateral."

12:23pm

Rep. Meeks (D-NY) pushing the "financial inclusion" promise he sees in crypto 😮‍💨

I would direct people to Tonantzin Carmona's report: "Debunking the narratives about cryptocurrency and financial inclusion", The Brookings Institution.

12:26pm

Forbes has obtained and leaked a copy of SBF's planned testimony.

12:30pm

Rep. Loudermilk (R-GA): "Summarizing, there's not evidence right now that his statement would be true that FTX US is completely solvent."

Ray: "Clearly not."

12:34pm

Rep. Gottheimer (D-NJ, member of the blockchain eight, recipient of SBF-linked funds), also a part of the blockchain eight, spending a significant portion of his time talking up his own record in trying to regulate crypto, and denigrating the SEC and Gary Gensler.

12:35pm

Gottheimer: "Do you believe Mr. Bankman-Fried when he says that all US users will receive a dollar on the dollar return of funds at the end of these bankruptcy proceedings?"

Ray: "That's very speculative at this point."

12:37pm

Rep. Davidson (R-OH, member of the blockchain eight), also part of the blockchain eight: "Based on your review of the records, is the transfer of customer funds from FTX.com to Alameda research in conflict with the FTX.com terms of service?"

Ray: "Yes, that's my view."

12:48pm, 12:49pm

Rep. Budd (R-NC, part of the blockchain eight, recipient of hundreds of thousands of dollars of SBF-linked funds): "What happened at FTX was fraud on a massive scale... the head of FTX should be dealt with in the same way that other disgraced leaders of Enron were prosecuted to the fullest extent of the law... What I want to protect is innovation, and we want to see it flourish..."

Blames SEC for regulation by enforcement, says they've forced crypto companies offshore. Talks up his own attempts to regulate crypto.

12:54pm, 12:55pm

Rep. Torres (D-NY, part of the blockchain eight, recipient of FTX donations) asks if SBF was lying when he tweeted on Nov. 7 that "FTX has enough to cover all client holdings".

Ray: "I don't want to give the dignity to his comments. He also said he had $10 billion to invest in the company that day, so..."

Torres: "At that time when he sent out the tweet... did FTX actually have enough assets to cover their liabilities?"

Ray: "Absolutely not."

12:58pm

Gonzalez (R-OH): "To your knowledge, were customer funds transferred to Alameda for the purposes of paying off called loans?"

Ray: "That's certainly possible. We need to investigate that further, but that's certainly one of the paths that we would potentially find."

12:59pm

Gonzalez asks about the backdoor between FTX and Alameda, which SBF has denied knowing about. "In your eyes, is there any way that SBF or senior management wouldn't know about this sort of thing?"

Ray: "No."

1:02pm

Gonzalez addresses claims in SBF's testimony, where he blames FTX's collapse on Binance, and says the company would have been fine otherwise.

Gonzalez: "Prior to that episode, is your belief that FTX was solvent?"

Ray: "No."

1:04 pm, 1:04 pm

Gonzalez on SBF's statement: "There's some accountability... but then there's a lot of excuse-making and some complaining. Like, 'in fact, many of us are still missing access to our own personal data, which is being held hostage by the Chapter 11 team's leadership'. I would note that that's what happens in life when you perpetrate a massive fraud and steal billions of dollars from your customers."

1:07pm

Rep. Tlaib (D-MI): "The idea that cryptocurrency can be a solution for financial conclusion is not only laughable, it's dangerous. These get-rich-quick kind of ads and targeting of my residents? It's predatory."

1:11pm, 1:12pm

Rep. Rose (R-TN) wonders about the timing of the charges: "The timing of the events of the last twelve hours is certainly interesting... [I] wonder why a prosecutor wouldn't want to potentially add 'lying to Congress' to accompany the list of charges against Mr. Bankman-Fried... It also makes me wonder why the SEC waited until today to file its own charges. Chair Gensler has failed at his job... Similarly, while he has been asleep at the wheel, the Democratic majority has failed to have him testify before this Committee for over fourteen months."

1:15pm

Rose: "FTX and Alameda hold.. more than $30B of Tether. Can you describe the efforts you are taking to ensure that unwinding FTX and the bankruptcy proceedings won't cause unnecessary impacts to these digital asset markets?"

not where I would've taken that question lol

1:19pm

Rep. Adams (D-NC): "Do you genuinely believe that these customers are ever going to get their money back?"

Ray: "It's a massive loss... it's too early to tell what the ultimate recovery will be to each customer."

Adams: "It doesn't like you really think they're going to get their money back..."

1:28pm, 1:28pm, 1:28pm, 1:28pm, 1:28pm, 1:28pm

Steil (R-WI) on the movement of funds out of FTX at direction of Bahamian authorities: "Do you have indication as to why Bahamian authorities made that request?"

Ray: "It wasn't a request. They just took it."

Steil: "There was no action required by FTX employees?"

Ray: "They were aided by the ex-employees. Mr. Wang and Mr. Fried."

Steil: "Is it in the eyes of Bahamian authorities that they did this to protect creditors? Do you have insight into the motivation behind this action?"

Ray: "Unlike Chapter 11, there's no transparency in the process in The Bahamas. We repeatedly asked them for clarity on what they've been doing and we've been shut down on that."

Steil: "They did not reply or it was unsatisfactory?"

Ray: "They put out statements that it was in the interest of Bahamian creditors, although our view is that it violated the automatic stay in bankruptcy."

Steil: "Do you believe that at that time Mr. Bankman-Fried was attempting to undermine Chapter 11 by expanding the scope, by moving assets to accounts under the control of Bahamian authorities?"

Ray: "It appears so."

Steil: "So it appears that he may be working to undermine the scope of US federal bankruptcy law."

Ray: "That's what it appears, yes."

1:33pm, 1:33pm

Ray: "The process in The Bahamian islands is not a transparent process. We have opened up the ability to share everything we have with the Bahamian government, similar to how we share with other liquidators around the world not only in this case but in other cases. It's meant to be a very cooperative situation. The pushback that we've gotten is sort of extraordinary in the context of bankruptcy. It raises questions, it seems irregular to me, there's lots of questions on our part, and obviously we're investigating."

1:37pm

Ray: "There is a general truth that users of the FTX US exchange will suffer less purely because of the siphoning off of cash and assets from FTX.com to Alameda."

1:39pm

Rep. Lynch (D-MA) asks if advertising to US citizens is what drew victims in to this disaster. Ray declines to answer ("I don't have a professional view on that").

1:41pm

Ray confirms to Rep. Dean (D-PA) that they have information that both SBF and Gary Wang were involved in minting new FTT and transferring it to control of the Bahamian authorities.

1:42pm

Ray: "What we don't know is whether the founders could have taken crypto and put it in a cold wallet that we just don't have awareness of."

1:43pm

Rep. Ocasio-Cortez (D-NY) seems very well-briefed, mentions the CoinDesk leak of Alameda balance sheets that precipitated a lot of this.

1:45pm

AOC asks about the request by Bahamian regulators to recognize Bahamian bankruptcy proceedings as primary. "Would that additional control be of any potential value to Mr. Bankman-Fried?"

1:46pm

AOC wants to know if FTX opened Bahamian withdrawals in exchange for the ability to remain in control/influence of FTX.

Ray: "We intend to investigate that very thing."

1:48pm

AOC seems to suggest that SBF's arrest in The Bahamas may have been as a direct result of Ray's testimony being published.

1:53pm

Rep. Timmons (R-SC) asks why the SDNY would have issued an arrest warrant "to facilitate [SBF's] arrest, to preclude his testimony which would have been incredibly helpful in the prosecution of SBF".

Ray, obviously, can't answer that question.

1:55pm

Ray confirms that they will pursue clawing back any withdrawals made in The Bahamas during the period during which withdrawals were re-enabled.

1:56pm

On working with Bahamian provisional liquidators: "We work with liquidators all the time on a cooperative basis, so this is a little bit unprecedented."

1:58pm

Rep. Garcia (D-IL, recipient of SBF donation): "FTX isn't an anomaly. It isn't just a case of one corrupt guy stealing money, it's about an entire industry that refuses to comply with existing regulation that thinks it's above the law."

1:59pm

Garcia lists active investigations:

DOJ investigation into Binance
DOJ investigation into Tether
SEC investigation of Do Kwon (Terra/Luna)

2:01pm

Garcia: "These companies are making money using one thing: hype. And when the hype runs out, and ordinary investors—especially latecomers who are disproportionately low-income, Black, and Latino—lose."

2:03pm

Rep. Auchincloss (D-MA, part of the blockchain eight, recipient of SBF donation) thanks Ray for his time and care in answering questions. "You haven't played any video games while talking to us, so that's terrific," he says, in direct reference to my question of SBF yesterday.

2:06pm, 2:06pm

Auchincloss asks for Ray's opinion of SBF's claims that, were he allowed to restart FTX, he could raise the financing and make customers whole.

Ray: "In my history of doing corporate restructurings, I don't find that remotely believable because the first thing an investor would have to do is pay several billion dollars just to have the company back to the position it was in."

2:08pm

Auchincloss directly states that SBF's arrest is "quite convenient" for SBF's counsel, suggests there may have been "improper collusion" between SBF and Bahamian authorities.

2:10pm, 2:10pm, 2:14pm, 2:15pm, 2:15pm, 2:15pm

Auchincloss, who is labeled as "very supportive" of crypto in Coinbase's rankings, says "My patience with the crypto bulls is wearing thin. It's been 14 years and the American public has heard lots of promises but has seen lots of ponzi schemes. For crypto, it's time to put up or shut up. It's worth noting that Ark, the innovation investor, several years ago identified five general-purpose technologies of the future: DNA sequencing, artificial intelligence, robotics, energy storage, and blockchain. And yet those first four 'disruptive technologies' have already delivered gamechanging innovation that affects my constituents in daily life. Blockchain has thus far delivered whitepapers and podcasts about Bitcoin and DAOs and NFTs, defi, and more, and it's all interesting—it's exciting even—but none of it has achieved product-market fit at scale. It's time for the blockchain investors and entrepreneurs to build things that matter, or to lose more credibility."

2:17pm

Rep. Waters goes to give closing statement, is interrupted by Rep. Gooden (R-TX) who says he was not given a chance to question. Waters gets annoyed, "if you would like to miss the votes on the floor..." He blames Waters for not calling a recess. She lets him speak.

2:19pm

Gooden asks if Ray knows if any third-party exchanges that received funds from Alameda were affiliated with FTX co-founders or their family members.

Ray says they are "certainly investigating that".

2:20pm

That's a wrap for today.

Is web3 bullshit? (Transcript)

2022-11-04T00:00:00+00:00

Last year I started to see a lot of talk about blockchains and crypto. In the mainstream media, on social media, with colleagues and friends. And that was nothing new. I mean, I’d seen crypto hype cycles before, and as someone who is not super interested in speculative financial investments it just sort of wasn’t my thing.

But this time, the message had really changed. There was this new word everywhere: “web3”. The future of the web, I was being told, was going to be powered by crypto and blockchains. I was reading that finally, we were going to fix the web! And that got my attention.

Because the idealism of the early web was compelling. This was a new technology that would provide everyone, regardless of means, with access to the world’s knowledge at their fingertips. It would provide equal access to things like governance and participation in their communities. Borders would no longer matter. The truth would set people free.

The web that we know today is a far cry from that early idealism. Most people experience the web filtered through the algorithms of web giants like Google and Facebook. Where information isn’t paywalled, it’s typically papered with advertisements. Web corporations squeeze every drop of data out of their users to resell or to build startlingly detailed advertising profiles. Social media companies optimize for engagement at the cost of everything else, even if it means radicalizing or inciting hatred in their users.

There are a lot of people out there who picture the next generation of the web as one where we reject the extraction and capitalization. I am one of them.

But that “web3” that I started to read about last year, amidst the advertisements of “fortune favors the brave” and crypto fanatics yelling about “going to the moon” and telling everyone else to “have fun staying poor”? That’s not quite how I expected we might get there. But maybe I missed something, I thought, as I began trying to figure out what web3 even was.

This was not the first time I had heard the term “web3”. Right around the turn of the millenium, people were talking about a different thing, “Web 3.0”, that was going to be the next generation of the Internet. At that time they were talking about the Semantic Web. Some of you who watched the Centre stage talks earlier this morning probably saw Tim Berners-Lee talking about Web 3.0 which, again, he defines very differently from the crypto version of web3.

The thing about a term like “web3” is you don’t necessarily know what it is until it’s happened. You don’t know what that fundamental shift is going to be that brings about a sea change in the web that deserves the name “web3”. So until then, we’re stuck guessing at what web3 might be—unless we’re a venture capitalist or a startup, in which case we have to speak decisively in the hopes of acquiring funding, even if we turn out to be wrong.

So, when I was researching, I was asking: “what is this new web3?” What was this next sea change that was going to be bringing about the future of the web? And it was hard to figure out. The one thing that was clear to me early on was that it was definitely supposed to involve a blockchain.

That turned out to be pretty emblematic of web3 projects as I dug deeper. What were they going to do? Who knows, but there was definitely going to be a blockchain involved. And the rest of it was pretty fuzzy.

As I researched more, I came across a few common buzzwords. Democratization. Decentralization. Censorship-resistance. The goals all sounded compelling, and really not unlike what I had in mind for the future of the web myself. But when it came time to find out how blockchains and cryptocurrencies were going to deliver us there, that was less clear.

And actually, unclear was the best case scenario. In some cases, it was outright ironic. The enormous venture capital firm Andreessen Horowitz published a slide deck hyping web3 that said “the Internet as we know it is flawed”. A graphic showed a flag planted in the web, emblazoned with logos of Facebook, Google, and Apple, with a caption showing that it was supposed to be decrying “Big Tech oligopoly”.

The oligopoly of Andreessen Horowitz, or its investments in the same Big Tech companies that they now decried, including Facebook, Instagram, and others, went conspicuously unmentioned. The slides underscored how now it was platforms like the OpenSea NFT marketplace that would help fix this terribly broken, unfair, monopolized web again, conspicuously failing to mention that Andreessen Horowitz had led several funding rounds for OpenSea and that OpenSea, at the time, held an outsized portion of the NFT market share. But they had nothing to fear if OpenSea lost its monopoly because Andreessen Horowitz has invested in other NFT platforms too.

You see, if they can convince people that this is the future of the web, they’ll be rich… richer than they already are. It doesn’t matter if it turns out to be true or not, or if they’re steering the web in the completely wrong direction, or even if they hurt a lot of people.

So in my research, I gave up on the smooth-talking founders, the venture capitalists with their slide decks and the tech journalists in the mainstream media who regurgitated sales pitches without much critical analysis and I moved on to something a little more concrete. I started looking at individual projects and asking, okay, how is web3 going? And what I found was: web3 is going just great.

I looked for projects that actually needed a blockchain and were credibly changing the paradigm in the direction of these stated web3 ideals. More often than not, I found projects that were rowing in the completely opposite direction.

Play-to-earn games introduced a rentier class of managers who oversaw low-wage workers in countries like the Philippines, Vietnam, and Venezuela and took a cut of their earning in exchange for just letting them play the game in the first place.

So-called web3 publishing firms sought to reinvent DRM, imposing even more limits on how textbooks or other material could be resold so that companies could squeeze out even more money from their users at more steps along the way.

Platforms that promised to empower artists who previously struggled to sell their digital art were full of stolen artwork, siphoning money away from the same digital artists that they claimed to empower. And those artists had to take time away from creating their artwork to find the stolen art, and then submit onerous takedown forms to OpenSea, and LooksRare, and Rarible and an endless list of other NFT platforms. Some of those platforms honored the takedown requests and removed the sales listings. Others had policies of not removing listings at all because, after all, if you want to go all-in on censorship resistance, that means everything. Your sales pitches might focus on controversial art, or empowering artists under oppressive regimes, but it also means welcoming stolen artwork, copyrighted material, spam, abuse.

“Censorship-resistant” blockchain social networks became saturated with spam, driving away their actual users.

Users who were convinced to buy tokens to “invest” into the “future of finance”, the “future of the web”, were hacked and scammed and phished and rug-pulled.

Stablecoin projects promising to overcome the volatility that keeps so many cryptocurrencies from functioning anything like a currency ended in disaster.

And projects that promised to provide security and returns on people’s crypto holdings were demolished in a series of cascading failures that left people with funds they desperately needed either completely gone or locked up while bankruptcy proceedings were underway.

That was for the projects that actually existed. Companies lied about how widely used their products even were. Systems that were advertised as changing the world and already out there being used turned out to be in early beta testing phases or just vaporware. And when pressed on their many bold and confident claims, executives turned out to be talking about what one day might be possible, or the potential of this technology… once all the big problems were solved. But if there was one thing those executives were sure about, it was that you should buy their token, and you should invest in their startup, and they will figure everything else out later.

The thing about potential is that you can say it about anything if you don’t really have to back it up.

I could start going around with a pitch deck saying that the thing that will finally bring about the sea change in the web, and we’ll call it “web3”, is steam-powered computing. My slides might be very fancy, I might be very charismatic, and I might be able to paint a picture of a very utopian web that was once dreamed about that would be right around the corner once we all adopted steam-powered computing.

But it is up to the rest of us, the people who really care about the future of the web and dream of a better world, to determine whether it’s credible or whether it’s just a load of bullshit.

Now, the technology industry is full of people going around with their fancy slide decks, spouting bullshit about their “revolutionary” ideas. You get used to it, right? Most of us don’t waste our time pointing out every project that looks like it’s going to turn out to be bullshit because infeasible ideas burning out at the expense of some startup founders and some wealthy early-stage investors is an everyday occurrence that typically is pretty harmless in the grand scheme of things.

But when an entire industry emerges, and begins to sell this idea to the general public that a better web is only possible through a technology that shows little indication of being up to the task? When it preys on people’s hopes for a future of a better web, and their fears about the effects of the current web on themselves, their children, and society to convince them to buy in—literally—to projects that may never even exist? When it sidesteps regulations on early stage investing through token offerings and convinces average people that their only way to financial stability is to bet their savings on technologies that they don’t understand because “this is the future!”

Then it’s worth paying attention.

Despite the depressing state of what’s currently being called web3, some people hold tightly to the idea that crypto and blockchains will democratize the web, solve wealth inequality, bank the unbanked, and maybe iron your shirts for you in the morning. I’m sure you’ve heard a lot of them speak here already at this conference.

So far, the primary successes of web3 have been in shiny marketing selling people the opportunity to invest in vaporware. In regulatory arbitrage, exploiting the fact that regulators have been slow and hesitant to act on unregistered securities offerings. And in outright scams and grifts. Many people in crypto say they welcome regulation—again, you’ve heard that here— as though it is not the lack of regulation that has enabled so many of these projects in the first place.

So many problems in today’s web are driven by capitalistic forces driving ruthlessly towards the enrichment of monopolistic tech companies rather than the betterment of society. You’ll have to excuse me for doubting that our utopian web dreams will be achieved through the introduction of a hypercapitalist technology that aims to financialize everything on the web even further, and exposes user data on public ledgers where it can be scraped by even more tech companies than are profiting off data today.

There will be a web3. The web has been evolving ever since its inception, and there is no doubt in my mind that we are overdue for a fundamental shift. Will it be blockchains and crypto? Venture capitalists and blockchain startup founders really hope that you think so.

I hope that the rest of us will continue working towards utopian goals like the ones I mentioned earlier—the ones that many people who are working in web3 and on web3 projects share—without necessarily being shackled to a technology that holds little promise for the web.

Revolution is possible. But it’s unlikely that we will be fighting for revolution alongside the same venture capitalists and tech companies who helped to get us into this mess in the first place.

As technologists, our duty is to develop responsibly, and we should be striving for more in the web, pushing to evolve it into whatever web3 may turn out to be, and chasing those ideals that could make the web truly wonderful.

But when presented with lofty promises we have to remember to distinguish the steam-powered computers from the truly revolutionary.

Dig deep. Ask the hard questions. Criticize the flaws. And cut through the bullshit.

Blockchain solutionism (Lecture transcript)

2022-09-21T00:00:00+00:00

This is a transcript of a guest lecture I gave at the University of Texas at Austin on September 21, 2022. This lecture was for a course in the School of Design and Creative Technologies called "Anti-Solutionism". There is also a Q&A portion at the end.

The recording is available on YouTube. The Google Slides are also publicly available (as well as embedded inline below as images).

I am Molly White. I’m a software engineer by trade… and by training, I guess. I also am a researcher and a writer. I have fairly recently—I suppose, the past year or so—gotten involved in researching cryptocurrencies, blockchains, this thing called “web3”, and all kinds of sort of related topics.

I run the website Web3 Is Going Just Great, which is a somewhat sarcastically named website where I keep track of a lot of the things that are really just not living up to the promises in web3 and crypto. It has a lot of examples of scams and hacks and just bad ideas that people are coming up with that they think crypto and blockchains are going to solve.

Before we get started, let’s go ahead and do just like a quick overview of what those words mean, because it can be a little difficult if we’re not all on the same page. I’m not going to get super technical, I know this isn’t a CS course, and it honestly is actually not that important to know the the super nitty gritty details of blockchains. But what you do need to know is that they are basically a ledger database that records transactions kind of like this. So you can think of it almost as if everyone had the record in their checkbook, and it was all sort of together. So yours was recorded along with, you know, your neighbor’s and everyone else’s and it was all in the same database and everyone could see it. So you could see, for example, in this example that Alice sends Bob five tokens. That depends on the chain what the actual token is called. And then maybe Bob sends Charlie two of those tokens, and then Alice is over there doing something herself. It basically keeps records of these transactions, but unlike with, say, your bank or with some other system, there isn’t one entity that’s controlling this record. So instead of your bank having a bunch of servers that record your monetary transactions, this is all a database that is maintained by hundreds or thousands of different computers that are all working together to keep this network online. And that’s a pretty difficult thing to do in computer science, and just in the world: getting a bunch of people that you don’t necessarily know or trust to all truthfully record the state of the system. You sort of get into this game theory problem of “okay, so we have all of these people who could all be bad actors, how do we convince them all to maintain this network and incentivize them against doing it?” All the solutions that people have come up with that are being used today for these blockchain solutions all involve, basically: someone has to spend or risk some amount of money in some way and then when they help to maintain the chain, they earn some money. So with Bitcoin, for example, which is one of the biggest cryptocurrencies, people have to spend money in the form of paying for electricity and for mining computers, and they are rewarded with Bitcoin when they maintain the network and verifiably add blocks to the chain. There are other systems, so Ethereum just notably moved away from the system that Bitcoin was using and they now have a system where people who have a certain amount of the token will stake that token and say “if I act badly,” you know, “if I do something that’s not in accordance with the network, you can just take away all my money” and so they are incentivized to not do that because they’re risking a lot of money. And they can earn money for, again, maintaining the chain. So that’s sort of the nuts and bolts of it.

I referred a couple times to cryptocurrency. What’s that? So, Bitcoin, Ethereum, you’ve heard these words perhaps. Those are basically digital tokens that people believe is worth something. It’s not necessarily like other examples of currency where, you know, the US government is issuing it or any other state issues it. It’s basically just an online piece of data that people trade around. And if you have it, hopefully you can sell it to somebody else for around the same amount that you bought it for, or more, or potentially less. It’s named a little bit poorly. It’s not really a currency. The idea that a token that could be worth twice as much tomorrow, or half as much tomorrow, could actually function as a currency is pretty unusual. There’s a good example with Bitcoin, where in 2010 someone spent 10,000 Bitcoins—which at the time was worth around forty dollars—to buy two pizzas. If he’d held on to those tokens it could be worth $190 million today. At the all-time high it could have been worth more than half a billion. So if you think about, you know, US dollars, which is a traditional form of currency: if you had ten thousand dollars or forty dollars in 2010, you know there’s inflation… if you still had that forty dollars, it may not buy the same amount of pizza that it bought you in 2010, but it’s like pretty close, right? Like it’s not hundreds of millions of dollars different. And so the idea that this would function as currency is pretty flawed in the sense that currencies really just don’t work very well when they’re this volatile. It’s really more of something like an asset like a stock maybe, or a commodity. People will argue over what it really is, if it’s a security, a commodity, but it’s something a little bit more like that and you can think of it more along those lines. People will often buy and sell the cryptocurrency without necessarily getting involved in the mining, just for the purposes of speculation. They hope that tomorrow Bitcoin is going to be worth more than it is today, or in a year, or in 10 years, whichever it might be, and so they buy it and hold it for those purposes.

Blockchains also serve some additional functions in addition to just recording those transactions that are like the number of tokens that went from person A to person B. You can actually store data using the same sort of systems that store those transactions. You may have heard of NFTs. This picture is a Bored Ape, which is one of the most popular NFT projects these days. Those are bought and sold in very much the same ways as tokens—cryptocurrency tokens. There’s also smart contracts. So basically people will add code—they’ll write programs, upload them to the chain basically, and then people can interact with those programs without necessarily having to connect to your server or anything like that. So if you’ve heard of smart contracts or defi or any of these words, around basically programs that are being built on the blockchain, that’s what that refers to.

Which then brings us to the idea of web3, which is first and foremost a marketing term. And I think that’s important to remember. This slide here is from a “State of Crypto” report that was published by Andreessen Horowitz, which is one of the biggest venture capital firms and who think web3 is just the bee’s knees, and everyone should be buying and selling crypto, and, you know, creating these web3 projects. It’s a very effective marketing term, I will give them that. It’s based on the idea of web1 and web2, which are basically historical eras in the Internet and in the web, where, you know… we started with web1: most people who were using the web were just consuming information. They might not have a website of their own, but they were reading other people’s sites. It was very difficult to create a website of your own, you might have to actually own the hardware to do it, and it was kind of a pain. Then there was web2, which is what sometimes people will refer to as today’s Internet. This was where more people were actually adding things to the web, so social media posts and blogs and whatever else. You know, sharing your photos, things like that. People were sort of writing to the web in more of a substantial way. But it’s also the web where advertisers play a very big role, online privacy is not in a great state, I think lot of people would agree with that. And so there’s certainly flaws with it. So people start talking about, okay, so what’s the next one? What’s web3? And there have been a couple of different suggestions over the years for what web3 might be. In like the mid 2010s some people thought it might be this idea of the semantic web, which I’m not going to go to into in detail, but there were basically other suggestions for what web3 might be. I would say crypto has been the most successful in getting people to believe that web3 will be crypto and blockchains and all those kinds of things, but we are still operating in a web today that primarily is not using blockchains. And so it’s mostly just this prediction that maybe it will in the future and also, by the way, you should invest in these companies because this is the future of the web. So, that’s kind of the the goal around web3. But usually when people are referring to web3 they’re referring to web projects that use blockchains to some capacity, so it’s not necessarily just like people trading Bitcoin—that’s not really a web3 thing—but people who are actually building web projects that use these blockchains, you know like NFT marketplaces or social networks that are powered by blockchains in some way. Those are, and those tend to be referred to as web3. Alright, that’s out of the way. We are all on the same page. I hope you all understood that perfectly.

So, why? Why blockchains, why crypto? What’s the point of all of this? First of all, that’s a really great question. I think a lot of people were like, “okay web3…” like “that’s the next one!” And, you know, the number two goes to the number three, and so people have called this “web3”, that’s just gonna be the future of the web. But I think it’s important to think about why do you actually need a blockchain, right? What does a blockchain do that software that we use today doesn’t do?

There’s some pros and cons. I’m not a big crypto person, obviously, I’m a pretty strong critic of it. But there are things that it does that other software does not necessarily inherently do. The big two are censorship resistance—so if you are relying on a database that is owned and controlled by your bank or your Facebook or by your government, for example, they have a lot of control over what you can and cannot do. And so a bank might be able to say “sorry, we’re not going to serve you. You can’t have a bank account with us because we don’t like you for some reason.” Your government might be able to say “you’re a dissident, and so we are not going to allow you to do whatever it is that you wanted to do.” And Facebook can ban you. I mean, most people know this, you know, Facebook has the keys to the kingdom and so they can say “sorry, we don’t want you on our service for whatever reason. You’re no longer welcome here.” With crypto, that’s not really the case no one can say “hey you, you can’t use Ethereum.” Or “you can’t use Bitcoin”. And there are some ways that people try to enforce restrictions around sanctions on who can interact with various companies that are built on Bitcoin and Ethereum, but at the end of the day anyone can read and write to the chain. It also provides pretty strong assurance that data wasn’t changed or deleted. So, with blockchains you can only ever add to them you can never actually delete a block from the chain. And once a block has been added you can’t change it. If you were to do so, or if you were to try to do so, it’d become very apparent and the whole system basically breaks dowm. So, you can pretty much rely on the fact that if there’s a block that says that Alice sent Bob five tokens, she did that. That’s not necessarily true with, again, your bank or your government. There’s certainly regulations and laws and things that would certainly discourage a bank from just forging transactions in their system, but they could technically do it if they wanted to do it. But then there’s the question: alright, so what’s the cons of crypto? This sounds great, but when we’re talking about technological solutions we need to look at both sides of the coin. There’s a pretty long list of cons when it comes to blockchains. They’re really slow. They’re really, really slow. Bitcoin does, I think it’s seven transactions per second. Which is nothing compared to Visa or very similar systems. Ethereum’s a little faster, but not much. And so when you’re talking about using this at the web scale, you start to run into problems with speed. It’s also very expensive. So, not only is crypto—you know, the Bitcoin or Ethereum, buying one or two of those can cost a lot of money—but in order to do anything on the blockchain—just send money—you have to pay for the transaction costs, and those can be very expensive and they certainly add up. It’s difficult to scale for the same reasons I mentioned, and it’s also really difficult to use. If you are trying to keep control of your own tokens rather than use a centralized wallet provider like Coinbase or something like that—and all crypto people will tell you that you should hold your own crypto, it’s the only way to do it and it doesn’t count if you’re storing it with Coinbase—that’s really hard to do. You have to basically become the security branch of a bank to do that. Even I, a software engineer, find it challenging. It’s difficult to do, there’s a lot of risk if you have a lot of money stored that way. And then, privacy largely relies on pseudonymity. So I mentioned this earlier: imagine if your checkbook statement was basically on a public database. That’s exactly—that’s literally true, that everyone can see your transactions, they can see that you sent money to a different party, and so you basically have to rely on people not knowing what your wallet address is in order to stay private. Which is a lot more difficult to do in practice than it is in theory, I would say. There’s enormous exposure to price volatility. So if you are building software on something like Bitcoin or Ethereum, and then the Bitcoin price—or, more like the Ethereum price, because Bitcoin is not really a software platform—if the Ethereum price doubles then all that money that you were paying to do transactions and run your software also increases. And it’s also very prone to volatility based on usage, so the more people who are trying to do transactions on Ethereum at once, the more it costs to do a transaction. There were some cases where transactions were costing hundreds of dollars, thousands of dollars even, because of congestion on the network. And finally, changing code and patching bugs is really difficult. So, I mentioned before that you can only ever add to the chain, you can’t delete from it or change blocks. That includes code that is being run on the chain. You can’t actually go in and patch a bug if there’s some flaw that allows people to just siphon all the money out of your project, you have to just release a new version of your project and then convince everyone to move over to it. Which is not the most smooth experience, and it means that the money in your previous project is probably all gone by the time you get the chance to do that. All of these things have, people have techniques that they have used to try to overcome them, but these are sort of the fundamental issues with the technology that then they sort of have to Band-Aid with other solutions to try to surpass them.

There are some claimed use cases for crypto. A whole lot of them. And I’m not going to go through them one by one, but: they say it’s a store of value, it could be an alternative in countries where the currency is enormously unstable, it could be used for remittances and cross-border transactions—you know, sending money back to your family in some other country. “Banking the unbanked” is a really big one—saying crypto will provide financial inclusion. Moving away from the web’s advertising model, provenance, decentralized governance, own your own data, real estate… I mean, people will say a whole bunch of things. Often not a whole lot of details around how they will solve these problems, but there are a lot of problems that they claim to be able to solve.

There are some more believable use cases, I would say. So, the big one, and I mentioned this before, is censorship resistance. This is another slide from a16z—Andreessen Horowitz, that is—who are condemning Big Tech, which is a little bit ironic because they’re a venture capitalist who funds a lot of Big Tech, including Facebook initiatives, so it’s a little weird that they’re calling them out on the slide… but who am I to judge? They have big talk around how crypto will end digital authoritarianism and Big Tech oligopoly, and that’s also not really been the case in practice with their projects, which tend to centralize very much and are again enriching venture capitalists. But it is true that if you need censorship resistance from the state, from your bank, from your software provider, cryptocurrency does at least try to achieve that. Whether or not a given blockchain is actually censorship resistant or not is kind of a different question, but in theory, that’s a possibility.

Another use case would be speculation. If you want to gamble on a crypto token, you can definitely do that. This is the Dogecoin chart. If you bought Dogecoin in February 2020 and held it and sold it in maybe April, you’d be doing pretty well. Some people did that and made a ton of money… and then have to explain to their family how they made money on “Dogecoin”, but sure enough that is possible. Unfortunately there’s the other side of that, which is that if you read about all these people who made a ton of money on Dogecoin and decided to buy Dogecoin in April, you’ve probably not been doing so well since then. But if you feel like to speculate on volatile assets crypto might be for you.

And then the biggest one, in my opinion: crypto is like catnip for venture capitalists. If you are creating a startup and you need funding, just tell them you’re going to use a blockchain and you are golden. That, I think, has been one of the biggest drivers of crypto and the web3 phenomenon: that billions and billions of dollars are going into it from venture capital firms. I mean, it’s just shocking amounts of money. So, in my opinion, those are sort of the more reliable or believable use cases for crypto.

But in my opinion, crypto and blockchains and web3 is mostly a solution looking for a problem. There’s this saying that if you’re a hammer, everything starts to look like a nail. There’s sort of a phenomenon in the tech world, especially in the past year or two, where people have basically been saying “alright, we need a blockchain. We’re going to use a blockchain, what can we do with it?” And so they start to sort of cast around, and they say “poverty” or “world hunger” or “cross-border transactions and remittances” or “social networks”… and they sort of start to try to look for something that a blockchain could potentially be applied to. It reminds me a lot of sort of… maybe 10 years ago? My timeline is probably off. But when Uber was really getting big and the big joke was everyone was trying to do “Uber, but for something”. You know, it was the gig economy boom, and so everyone was like… “Uber, but for your laundry!” or “Uber, but for taking care of your pet!”, you know, “dog walking!” And people were coming up with these startups and they were being hugely valued because they were kind of like Uber. And that’s sort of what’s happening today except it’s “dog walking, but on the blockchain!” or “insurance, but on the blockchain!” At best, a lot of them are just kind of silly, you know? It’s like… why does a dog walker need a blockchain, come on, that just doesn’t make sense. But some of them I think can do real harm, especially when you start to get into really serious issues like hunger, for example, or selling crop insurance to African farmers was a big one not too long ago. And there’s actually real people at the other end of that who need food or they need the assurances that they’ve been given around their crops, and if those projects fail or something goes really wrong, they can really end up getting the short end of the stick.

This is a good illustration of some of the problems—quote-unquote “problems”—that people are trying to solve with crypto for some reason. There’s carbon offsets, there’s putting your DNA on the blockchain and then selling that, I guess. Dating apps on the blockchain. Social networks. Starbucks on the blockchain! You can get an NFT now if you are part of the loyalty program. You can get crypto just for walking around! Not really sure, I still haven’t figured out what the business model is there, but that’s a pretty cool one if you’re the one walking around, I guess. NFTs for books and publishing! So, this has sort of been the past couple of years in the crypto world.

We really run into something that is broadly known as the XY problem. If any of you have ever used Stack Overflow, you might have run into this. Generally speaking, the idea is asking “how do I do Y?” You know, “how do I use a blockchain to solve world hunger?” Rather than “how do I solve world hunger, and what’s the way to do that?” So people have basically been trying to find the solution rather than the problem. There’s a good example of the XY problem where someone was receiving complaints around elevators. People were waiting around, the elevators were really slow, they were really bored, and they were complaining about elevators. And so they started to figure out, okay, how can we make the elevator faster? But the real problem was that people were bored, and so what they ended up doing was installing mirrors in the lobby, and people got to admire themselves in the mirror and give them something to look at, and the complaints went down dramatically and they didn’t have to do anything to the elevators. There’s another good example of this where if you go… you know, you’re at a hotel, you’re in a different country, and you go and ask “is there a convenience store nearby?” They might just say no, and then you’re kind of out of luck. Whereas if you say if you look at the actual problem, which is “I forgot to pack my toothbrush”, you know, “I need something simple like that”, they can say “well no, there’s no convenience store, but there’s a gift shop” or “there’s a supermarket” or there’s something like that and you’ll actually have a better chance of solving your problem. This comes up a lot in crypto, where people are saying “how can we use a blockchain to do X?” when they’re not asking “how can we do X?”

A good sort of philosophy for trying to solve problems like this is going, “well, what’s the actual problem you’re trying to solve? Why does that problem exist in the first place?” And then, “what solutions might address the actual issue, and what are the trade-offs of those solutions?” This is sort of the standard model in software engineering, but I would say it’s kind of the standard model in most industries for trying to solve problems, and for some reason it’s sort of been turned on its head. I say “for some reason” as though the enormous amount of venture capital funding isn’t sort of the clear reason.

So we’ve seen this in reality a few times. For example, asking “how can we introduce Bitcoin to El Salvador?” So if you ask that question, well, you can make it legal tender alongside the dollar which is the current currency in El Salvador. You can have the government create a Bitcoin wallet app that everyone can easily download. You can give people $30 in Bitcoin if they download that app. And there you go, you’ve got Bitcoin in El Salvador. And that’s exactly what they did! They weren’t looking, in my opinion, at the actual question of, “well, why do you need Bitcoin in El Salvador? What’s the problem you’re trying to solve?” One of the problems they’re trying to solve is, well, it’s expensive and slow to send remittances and El Salvador gets 20% of its GDP via remittances, which is a huge amount. So, “how can we make it easier for people to send remittances?” And sure, you could say “well Bitcoin!” That’s a solution. But you should also ask, “well what’s the trade-offs of using Bitcoin?” Now people are exposed to Bitcoin’s volatility and risk. So when El Salvador rolled out Bitcoin as legal tender it was at $45,000. Now it’s under $20,000, so anyone who decided to put money into Bitcoin at the advice of their president is down over half. People have to try to cash out this Bitcoin to spend it on food or rent or whatever it is that they’re actually trying to use it for. People who are in the U.S who are—Salvadoreans in the U.S who are—they have unusual immigration status, they’re not documented, they can’t necessarily use it very easily because they need a bank account to do it. And that’s a fair number of people. Bitcoin is also slow and expensive, just like remittances, especially with the Chivo Wallet, which is what’s being used in El Salvador, which can hold on to your Bitcoin for indeterminate amounts of time. So they’ve had this situation where they’ve tried to solve the problem Y rather than attacking the problem X: why is it slow to send remittances? Well, there’s regulations there. You have to make sure that you’re not sending money to someone on a terrorist watchlist, that they’re actually a real person. And there’s there’s certainly serious issues with remittances. There’s bloat in the financial system, there are technological improvements that can be made to smooth that, there’s improvements in the regulations that could be made. But you do sort of need to consider those potential things before just saying “well what about Bitcoin?”

So here’s another good problem: people are asking “how do we make blockchains and crypto safer, easier to use, less expensive to use, faster?” when I think the real problem is that people are falling victim to these predatory schemes because venture capitalists and crypto evangelists are convincing them it’s the future of the web, it’s the future of finance, it is the solution to trying to create generational wealth and escape difficult inflation or earn returns on their investments that are not available to them in the traditional financial system. If you look at problem two, my solution to that problem, at least, has been this website: Web3 is Going Just Great.

This is a project that I run, and what it really does is it just keeps track of, “well how is web3 going? How is this project that claims to be able to revolutionize the web, increase equity to financial systems, solve the issues of advertising and lack of privacy online, how’s it going?” Generally speaking, it hasn’t been going so well.

There have been multitudes of examples where the security issues that are fairly inherent to blockchains and cryptocurrency have resulted in hacks of more than $100 million. These are all more than $100 million, and these are all in the past… I was going to say two years, but I think it’s actually more like one year. I think the earliest one is August 11th here. So just enormous, I mean enormous, amounts of money being stolen. Sometimes it’s the venture capitalists who take the hit, more often it’s the people who are just putting money into these things as a retail investor.

And then there’s other examples of things that are happening in web3 as well which are not necessarily the $100 million hacks, but… it’s sort of the rake thing. You know, when someone steps on a rake? It’s examples of things happening that are so typical of crypto and web3 and blockchain-based systems that you almost have to laugh at it. Bill Murray’s NFT charity auction earned over $100,000, just amazing stuff. And before they could give it to the charity, it was stolen because his wallet got hacked. A crypto scam watchdog group that was trying to help identify other crypto projects that might be scams, they got scammed. They got exploited, but that’s the whole thing that they’re trying to prevent. Someone, a developer, ran the wrong command. Instead of typing one thing they typed the other thing, and they closed the project contract, and it meant that the $600,000+ that were in that project… just gone. No one can get it. You can see it’s there, but you can’t get it anymore. And so everyone using that project is just out of luck. Someone tried to swap $5 and they ended up… it’s like if you went to your bank, and you put a five dollar bill into the ATM, and then the little screen said “alright, you’ve got $10 trillion in your bank account.” Imagine if that happened. Needless to say the user did not actually have $10 trillion, that would have like destabilized traditional finance if that kind of money was floating around, but it said they did. A carbon offset company that was trying to help with the environmental situation, help people feel better about their environmental impact, they started a forest fire in Spain that ended up spanning over 35,000 acres. And it was the second one that they’d started that month. Then in November, Squid Game? Huge TV show, everyone loved it. People were so excited about Squid Game that they bought into this big Squid Game token which had no affiliation with the Netflix series, nothing to do with the original thing, and everyone involved in it just made off with $3 million because that was how excited people were to buy this new Squid Game token hoping that it might be the next Dogecoin, the next Shiba Inu, the next Elon Musk token that would make them overnight trillionaires.

So, needless to say, I think that the the attempt to use technology to solve problems that in some cases are very serious and very real problems—you know, access to banking, authoritarian governments, people being able to send money on the Internet in a reasonable way, these are real problems—but saying “alright, we’ve got a blockchain how can we solve them?” has really not been going so well. I think, just to conclude, it’s important to realize that there are basically never purely technological solutions to societal problems that crypto and other technologies are trying to solve. Sometimes technologies can be a part of the solution, but generally speaking you can’t just say “well the financial system has problems, so we’re going to make a whole new financial system, and oh by the way, you can’t change anything in it and if someone steals your Bitcoin they’re gone forever” and expect that to just be a sudden improvement over the traditional financial system which has years of development and regulation baked into it.

Questions and answers

Is crypto over? It seems like there hasn’t been as much appetite for it lately.

I think this chart here is maybe a good example of what tends to happen in crypto.

This is a Bitcoin price chart since its inception. Basically when it started it was very very small amounts of money, you know, Bitcoin was ten dollars or something like that early on. And then it had this big big surge in like 2017, you might remember there was a whole bunch of hype around ICOs—initial coin offerings—that instead of going public, every company was just going to release a token and it was going to be amazing. That got people pretty excited for a while, and then the SEC said “well that’s just a securities offering” and so things went back down a little bit. And then they sort of just went along for a couple of years until 2020, which was NFTs and web3 and all these new and exciting potential uses for crypto. We’ve hit sort of the the hype tops in 2020 and then again in 2021, and more recently people have been less excited about NFTs and it’s like “the stupid apes”, you know? There’s less of a societal willingness to accept those. Also with just the sort of traditional financial system not doing as well, you know, stocks have been down, there’s been less appetite for these crazy investments and “walking your dog on the blockchain”, so things like that have been down. But crypto and… actually I didn’t point it out but there were other sort of smaller hype cycles back in here that have sort of been blown out of the water by the more recent ones. Crypto just follows these sort of cyclical patterns, where people get really excited about something, something sort of new comes along, whether it’s NFTs or ICOs or web3 or whatever it might be, people get crazy excited about it and then it just becomes unsustainable or something happens and it just crashes right back down again. I think we’re kind of doomed to repeat that unless there is a significant regulatory change that would actually crack down on the fact that, hey, these tokens look a lot like securities and you really actually have to comply with the traditional regulation that securities have to go through, which might dampen some of the excitement around it and stop these crazy hype cycles from happening. But I think when people see the price crash like it has and they go “crypto’s dead, blockchains are dead, the hype is over”, I think that’s maybe a little too optimistic. I mean, some people would call it too cynical, I would call it too optimistic. People love to speculate on this stuff, they love to come up with new ways of using cryptocurrencies to sidestep securities regulations, or anti-money laundering laws is another big one that that they get around by using crypto. People will always come up with new ways of using it, and I think it’s it’s likely that that will happen again. Please don’t buy crypto based on that, that’s not financial advice, etc.

Are there any good uses for blockchains?

Yeah, it’s a great question. One thing I will say is—I am not a big fan of crypto, obviously—that’s not to say there have not been instances in which crypto has really helped some people. Some people have become overnight millionaires and that’s great for them, obviously. They’re they’re not going to be upset about that. There have been instances where, for example, there were large donations to Ukraine when the Russian–Ukraine invasion started. That’s obviously, I think, only a good thing regardless of whether or not they use Bitcoin or not to do it or a million other cryptocurrencies. There are some examples where people have tried to flee authoritarian regimes and they put their money into Bitcoin and then they haven’t had it confiscated at the border. All these different things. Generally speaking, my opinion on this is that crypto’s best use cases are isolated. Mostly because, for example, if an entire, a huge percentage of a country for example all started to try to flee an authoritarian regime using Bitcoin, that authoritarian regime would probably start paying attention and crack down on that. The same way they do if you try to flee with a trunk full of diamonds or cash or gold or whatever else you might be doing. The problem is the authoritarian regime, right? And so you need to find solutions that fit the problem. Is there something that—outside of those examples of very severe circumstances where you need anything that’s better than a really bad situation—is there anything that I think crypto is particularly suited for? I think it works really well for people who are looking for speculative investments, almost as a gambling tool. Obviously the fact that you know Bitcoin generates the same, er, uses the same amount of electricity as like Finland or something like that is probably not great for something that is just gambling. You know, imagine if Vegas used that kind of electricity. They’ve got a lot of lights and stuff so I guess they probably do use a lot of electricity, but it’s not like crypto. But besides that, I think the the actual requirements that are satisfied by a public blockchain—and that’s what I’m talking about here, is these public blockchains where anyone can read anyone can write—fairly few and far between. There are definitely circumstances where you want a database where you can… it’s append-only and you can trust that it’s never been changed in the past. So for example, if you were a bank and hackers got into your system and you want to look over logs of what was happening during that hack to figure out what they did, you want a system where you can trust that the logs weren’t changed or that that bit right in the middle isn’t gone. But there are also a lot of ways of doing that that don’t require a public blockchain. I think the number of problems that are really solved by a public blockchain are pretty minor, pretty minimal, yeah.

What do you think would be some ways to improve the web today, if not crypto and “web3”?

It’s like you plant, er, like I planted that question. That’s actually what I’ve been doing a lot of research into more recently. So I am just a huge fan of the web. It’s a weird thing to say, it’s like “I love the Internet!” And I really do. I think there’s some amazing things that the web has enabled. Wikipedia being a good example, you know, I think everyone’s used that. It’s amazing that there’s just this free repository of information out there that’s fairly reliable, that is just collaboratively created by a bunch of people who aren’t paid to do it. Like, that’s wild. I think if the whole web was like that, that’d be amazing. So yeah, I love to think about like, “okay, so how can the web be what we wanted it to be in the beginning?” When people first started to talk about the web, it was this really utopian idea of everyone can talk to anyone halfway across the world, you don’t need to pay to talk on the phone, you can just hook up your modem, you’ll be able to meet all these people from different cultures, experiences, and I’ll get to share things with you, you’ll get to make friends, you’ll get to run your business with someone halfway around the world, all this really cool stuff. And the web absolutely has achieved some of that stuff. The web is pretty awesome for what it is today. But there’s also a lot of parts of it that are not great. So, for example, the monopolization of the web by just a small handful of tech companies, that’s not great. And one thing you might notice, actually, is if you pay attention to web3, you’ll start to notice that a lot of the things that I’m saying are bad about the web are actually the same things that people in web3 are saying are bad about the web. We actually agree on a lot of the problems. We disagree a lot on the solutions. So, the monopolization of the web, that’s a big one. The prevalence of advertising and the advertising-based model that the web is built on, I think is pretty terrible especially as you start to look into the invasions of privacy that are happening around that. You know, you have to hand over a lot of data. Sometimes by actually entering it into a form, but more often wthout really your knowledge that they’re collecting that data. I think there’s a lot of problems like that. Governance is another big problem, of platforms online. I mentioned Facebook banning you. The crypto solution is, “well, we’ll just create a project where no one can be banned”, right? Ethereum, you can’t ban someone from using Ethereum. I don’t know if that’s really the direction that we should be going, around when you look at online extremism, when you look at… you know, you can look at the really extreme examples like political extremism, child pornography, revenge pornography, all those really awful ideas of why you wouldn’t necessarily want a truly free web where anyone can put anything they want. But you could also look at just the really boring and mundane examples, like imagine if there was no spam filtering on the web, right? Like, “anyone can post to the web”: that means that the people trying to sell you fake purses, and those weird scam replies you get on Twitter if you post anything about NFTs, that’s just everywhere, Twitter can’t do anything about that. So there’s examples of stuff like that, where it’s like, oh boy, I don’t know about that… So as far as what we could do to achieve a more wonderful web, I think it’s a wonderful question. It’s one that I’ve been thinking about a lot. I think that reducing the monopolies would probably go a long way. One of the reasons Facebook sucks so bad is that there just aren’t that many competitors to Facebook, and the reason that there aren’t that many competitors is not because there aren’t people who think they could do a better job, or that could make a social network that people actually want to use, it’s because anytime someone tries to create one, Facebook buys them or they shut them down in some other way, and so they can’t exist to compete with Facebook. Then you end up with these behemoths like Facebook and Google and Amazon and all these other big names that are incredibly difficult to compete with, because they’ve become so big where if you’re sitting in your dorm room dreaming up the next social network you’re like, “boy, I don’t know if I can compete with Facebook…” So I think some changes to monopolization, and actually allowing for proper competitive marketplaces online, basically, would be an improvement. I also think that a lot of the best things in the web come about because people just have the time to do it. One big problem with Wikipedia is, you know, I love to edit it, I spend my free time doing it, I think it’s really wonderful and a great way to give back but also to entertain myself, and I’m able to do that because I have free time that I can spend doing things like that. But there are a lot of people out there who don’t. They work two jobs, or they have a bunch of kids they need to take care of, or they have elderly family members that they’re caring for, or for whatever reason they just can’t take the time to do those things that are really cool and really fun for them. Obviously not everyone in the world would go and edit Wikipedia if they had more free time, but I think that everyone has something that they would do if they had that free time, and a lot of it is societally beneficial. If you look at crypto, the answer to that is “well, we’ll just pay everyone to edit Wikipedia or play a video game or post on a social network”, and that’s the solution. But when you look at how that actually works out in practice, it also means that people have to hold the token, they have to pay to get the token, so now not only do you have to find free time, you have to find the buying costs to do something like edit Wikipedia or play a video game. If you look at Axie Infinity, which was the biggest crypto blockchain game until it was spectacularly hacked and things sort of fell apart then—by North Korea, by the way—in order to start playing Axie Infinity, you had to pay a couple hundred dollars to buy your little Axie character which then you would sort of battle against other Axies in sort of a Pokemon way, but way less fun than Pokemon has become or even started out being. So imagine, I mean—buying a $60 video game is already a lot for people, right? Like, that’s what it costs to buy an Xbox game… when I was younger, I don’t even know if it’s true anymore… I feel like an old lady, “what does a video game cost?” If you’re someone who is not in the US, or is not in a developed country where salaries are fairly high, it’s still $300 and that might be your weekly wage. So the whole idea of “we’ll create this better internet by financializing everything” I think has a lot of problems. I’m a bit of a leftist, my vision for the future of the web also involves a future of society where people are able to have time that is not purely spent earning money, and so I think things like universal basic income could go a long way towards creating a web that I think would be really great. Or just improving societal safety nets so that people aren’t having to rely on a job for their health insurance or whatever it might be. I think it kind of comes back around to the main point of this, which is that it’s really hard to come up with a purely technological solution to a societal problem, and so in order to fix the web I think we have to fix a lot of society—not just write the next best HTTP implementation or something like that.

It seems like the web3 movement has taken on some of the language of other attempts to improve the web, such as around “decentralization”.

I think a lot of what… a lot of the talk around decentralization in crypto and web3, it often conflates decentralization of computing with decentralization of power. If you look at Bitcoin or Ethereum they’re talking about, well, it’s super decentralized because there are thousands of computers anywhere in the world that are all mining these coins… well, validating now, Ethereum recently changed its model. And that’s decentralized. But you could say that about Amazon Web Services, right? They have datacenters all over the place, and they’re not normally considered decentralized because Amazon controls all the power. It’s all just one company. The same is often true of a lot of crypto projects, where the power is actually quite centralized despite the computing being decentralized. So, yeah, I think that the idea that decentralization is somehow inherent to crypto or to web3 is a very compelling sort of misdirection.

Where can I find the project you shared screenshots of?

The project is called Web3 is Going Just Great. You can find it on the web, it’s web3isgoinggreat.com. Free to take a look at if you like. Basically any variation on the name will get you there, actually. Sometimes it has the “just”, sometimes it doesn’t, you can just put it in. It’s also on Twitter, if you happen to use Twitter, so @web3isgreat on Twitter.

If technology can’t solve societal problems, what should be the role of software engineers going forward?

I mean, I think my ideal scenario would be that more software engineers realize that. I think there is this really strong techno-utopian view among software engineers that we are, you know, God’s gift to this world and we can write software to do just anything. Which, we can write some pretty cool software, don’t get me wrong, but I don’t think we’re gonna fix all ills in society with software. And it would be really cool, I think, if more software Engineers would both acknowledge that and then actually become involved in the societal problems that do really need fixing. Like I said, technological solutions are probably never going to be the solution to a societal problem, but they can definitely be a part of it. I think that there are all kinds of public good software projects that are out there. Focusing on those, I think, is always going to be a good thing. But I would like to think that in the future, software engineers might be taken down just to peg or two around their belief in society being fixed by the programmers. I think a lot of industries fall victim to that. There are writers who think that their ideas are going to be the best solution to all of the world’s problems. Politicians for sure. Everyone, I think, is prone to it.

Announcing the Whitespace newsletter and a Patreon

2022-08-21T00:00:00+00:00

I’ve launched a Substack,[^fn1] and would be delighted if you would consider supporting or sharing.

This post has been cross-posted from my new newsletter, Whitespace, where it is Issue 0. If you are an RSS subscriber, please note that the newsletter publishes to a separate feed.

I’ve been a little busy this year.

I launched Web3 is Going Just Great in December, and since then I’ve researched and written more than 750 entries for the site, which has more than 100,000 followers on Twitter and finds itself on the first page of Google results for the search query “web3”. I’ve written fourteen longer-form essays about cryptocurrencies and blockchains, and I gave a guest lecture at Stanford University about the abuse and harassment risk, which subsequently received more than 20,000 views when published on YouTube. I’ve participated in roundtables to help advise the Office of Science and Technology Policy and the Financial Stability Oversight Council, and spoken to policymakers and regulators at both the federal and state level. I was a lead signatory on the Letter in Support of Responsible Fintech Policy, and I brought together around fifteen cryptocurrency researchers and critics to highlight how the media has been irresponsible in its coverage of crypto. The open source code I wrote for that was later reused by The Globe and Mail to annotate a speech by the Pope. I also started a discussion among the Wikimedia community that ultimately resulted in the Wikimedia Foundation, the non-profit organization behind Wikipedia and related projects, no longer accepting cryptocurrency donations, a strong stance that made waves even outside of crypto media.

The Washington Post published an article describing me as “the cryptocurrency world’s biggest critic”, and John Naughton wrote in The Guardian that I “could be the new JK Galbraith… just much tougher” and described me as “the sharpest critic of crypto on the web”. I’ve spoken to countless other publications to try to get my message out, and appeared on TV networks including CNN, Bloomberg, and ABC (the Australian one). I’ve spoken on podcasts ranging from the more mainstream (Current Affairs and Recode Media) to the tech industry-specific (Reimagining the Internet, Tech Won’t Save Us, and This Week in Startups) to the crypto-focused (Crypto Critics’ Corner, Griftonomics, and Digitally Rare). Fast Company named me as one of their Most Creative People, and I was recently made a Google “Champion Innovator”.

When I left my job in May, I planned to take a month or three off to spend time with family and decompress from a long period of high stress at work. I imagined the days would mostly consist of walking my dog, reading novels, and poking at a side project if the urge struck.

Needless to say, that’s not quite what happened.

I’m currently spending at least twenty hours a week researching, writing, coding, and talking to people (interspersed with plenty of family time and dog walks, don’t worry). To date I’ve chosen not to accept payment for this work, save for $477 in donations towards Web3 is Going Just Great’s hosting costs (at the time of writing; always up-to-date on the contributions page), preferring to remain financially unentangled.

I expected that by the end of the summer I’d probably have run out of things to do and would be ready to jump into my next software job. But it’s been about three months—what I estimated might be the upper bound of time I spent gainfully unemployed—and I’ve barely even touched my stack of novels. But although I am far from bored, it’s time for me to think more concretely about what’s next.

I have a lot I still want to do. I’ve got a few exciting things lined up, some of which I can talk about now: I’ve accepted an invitation to become an affiliate at the Berkman Klein Center for Internet & Society at Harvard University, where I’m excited to collaborate more with some brilliant people on what the future of the web should look like. I’ll also be speaking at the first conference to take a more skeptical view of cryptocurrencies and blockchains, through which we aim to provide some counterbalance to the explosion of moneyed and connected crypto industry lobbyists attempting to influence policy. (Registration is still open, join us!) And of course, I intend to continue doing all the same types of things I’ve listed above: maintaining Web3 is Going Just Great, researching and writing, speaking to journalists, and offering my advice where I think I can make an impact. My to-do lists (yes, plural) are brimming with features I’d like to add to Web3 is Going Just Great, other coding projects that would help me with crypto analysis and keeping track of my research, essays to write, and rabbitholes to dive into.

I still plan to go back to software in the near term—I do enjoy it very much, and I also live in a country where the best way to get health insurance tends to be through a job with benefits. Even if I were to go back to full-time software development tomorrow, I would keep doing the types of things I described above (though inevitably to a lesser extent). After all, I managed it from December to May, while also working more than 40 hours a week.

However, I’ve realized that, at least until this May, I had structured my life such that I spent most of my time doing the needful—first attending classes and studying, then working full-time—while squeezing in what I thought was important around the edges.

It started when I was a teenager, when I started spending a lot of time after school (okay, sometimes during school) writing Wikipedia articles and otherwise helping to maintain what I feel is an incredibly important free knowledge resource. In high school and college, I volunteered to mentor college students who were editing Wikipedia as a part of their coursework in hopes of bringing them into the editing community more permanently. From 2014–2017 and 2019–2020 I served on Wikipedia’s Arbitration Committee, the “last resort” on Wikipedia for major disputes, and where I helped arbitrate conflicts on topics ranging from American politics to Palestine–Israel to Gamergate to administrator misconduct. In 2016 I compiled a website (look familiar?) to help expose some serious organizational issues that had developed at the Wikimedia Foundation, which ultimately helped spur major change. In 2018 or so I began to take a more active role in maintaining Wikipedia articles about political and gender-related extremism. The latter two efforts both put me in the crosshairs for serious harassment, doxing, and threats, which I’ve endured without backing down. In 2021, I helped journalists document the meltdown of the domain registrar and friend to far-right extremists, Epik, and pushed for accountability and action relating to their executives’ own harassment of individuals and enablement of those who used their services to endanger others. Also in 2021, I worked on an open source tool to help security researchers discover vulnerabilities exposed via Github, such as the startlingly widespread use of default credentials among organizations who deploy Google Earth Enterprise.

The common thread is that it doesn’t really make sense to be paid for any of these specific things, and I’ve always done all of them for free. But I’ve come to realize there are people who wish to support me in continuing to do these general kinds of things—whether related to cryptocurrency, Wikipedia, or something else—and who would like to help me make this a more sustainable part of my life.

For that reason, I’ve created a Substack for those who want to support me in continuing to devote a lot of my time to this type of work. I would love to be able to continue focusing solely on this work for a little while longer without also having to worry as much about having zero income. It would also be enormously cool if this support would allow me to be a little more creative in how my next job is structured, such that I have more time to continue focusing on what I find really meaningful, but I’ll see how it goes.

For those who’ve been following me and my work, there will be no real change to what I’ve already been doing. Web3 is Going Just Great will continue to be independent and ad-free. I will continue my policy of not accepting payment to influence my work, be it by running sponsored posts or not covering events that might reflect poorly on an individual or organization.

In an effort both to reward those who choose to financially support me and to get my work in front of people who don’t use Twitter or regularly visit Web3 is Going Great, I’m excited to announce that I will be starting a newsletter: Whitespace. I intend to publish it roughly weekly, and it will be broad-ranging and not solely focused on crypto. Expect to see a digest of that week’s crypto disasters along with a little more analysis than goes into the W3IGG posts, updates on what I’ve been working on, interesting reading and listening that I think is worth the share, a healthy smattering of all the weird and interesting things I stumble across in my Internet travels, and, inevitably, photos of my dog. I’ve already gone ahead and published the first edition to give you a little preview. Like most of my writing, it’ll be a little snarky, a little weird, and I hope it will make an enjoyable addition to your email inbox.

If you would like to be a paid subscriber, you can sign up for a paid subscription! If you can’t afford to or don’t wish to become a paying subscriber, you can still subscribe to the newsletter and receive all posts for free.

As a free knowledge advocate and hater of paywalls, I can’t stomach the idea of writing a paywalled newsletter. However, those who do chip in will get to read the newsletter a bit earlier than it goes out publicly.

Going forward I may try to think of other ways to reward subscribers who support my work financially (and I’m open to suggestions!), but the goal is primarily to enable the work that I’m already doing—which will always remain free to the public regardless of whether they can chip in or not.

Thank you so much to everyone who’s encouraged me already in the work that I have been doing. You have highlighted to me many of the ways the web is already going really great.

Statement to the Financial Stability Oversight Council: Regulating digital assets

2022-07-27T00:00:00+00:00

I was asked to give a statement to a Financial Stability Oversight Council discussion that stemmed from the Executive Order on Ensuring Responsible Development of Digital Assets. I was asked to specifically address: technological risks posed by digital assets, factors that would drive substantially greater adoption of digital assets, and actions that financial regulators could take to address financial stability risks and regulatory gaps associated with digital assets. I’ve reprinted that statement here.

I’m a software engineer and also an independent researcher of cryptocurrencies and public blockchain technologies more broadly. I mostly focus on hacks, scams, and the other devastating impacts of some of these projects on retail participants, as well as some of the risks we are facing if cryptocurrencies enjoy greater adoption and integration into both finance and society in general. I hold no cryptocurrency or positions in cryptocurrency companies, nor do I hold any long or short positions on crypto or related companies.

I would like to begin first by noting that my particular area of interest and research is cryptocurrencies, and so I will be focusing on those in my remarks today. However, the concept of “digital assets”, and even just “digital currencies”, is much broader. While I am quite critical of cryptocurrencies and skeptical of their potential to improve finance or society as a whole, I do remain cautiously optimistic about some digital asset use cases: namely, the eventual introduction of a non-cryptocurrency-based form of digital cash. I think it is important to recognize that cryptocurrencies and other blockchain-based tokens are only a subset of digital assets.

Some features of cryptocurrencies pose risks both to individual consumers and to the financial system in general.

One so-called feature of cryptocurrency is that transactions are irreversible: once a transaction has been recorded to the chain, there is no undoing it. If party A sends party B some crypto tokens, the closest thing to “undoing” that transaction is to convince party B to send the tokens back. This differs from traditional finance, where there is some consumer recourse in the case of fraudulent transactions or erroneous transfers. If a user transfers crypto to the wrong address, falls for a scam, or suffers a hack, that transaction is permanent.

Privacy and pseudonymity on a public ledger also poses some risks that don’t exist in much of traditional finance. With cryptocurrencies, it is as if everyone’s banking transactions were publicly visible, but each account name was replaced with a random string of characters. In some cases, even the exchange doesn’t know who controls the account associated with the string of characters. Some cryptocurrency exchanges and other projects implement varying degrees of know-your-customer and anti-money laundering protection, requiring their users to submit documentation, though even those that do often implement these restrictions in shoddy ways. Some don’t require this at all—particularly the decentralized exchanges and projects—and allow people to transact with no identity verification. This introduces additional difficulties for law enforcement when trying to address fraud and other crimes, and also carries risk around sanctioned individuals and groups.

For those who are technologically savvy, the pseudonymity can be a boon: they are able to operate without disclosing their identity to the public or to the services they choose to use, and they can maintain a degree of privacy. For criminals, it’s even more of a benefit—it’s much easier to get away with a crime when the profits of that crime can be transferred to an anonymous crypto wallet rather than a traditional bank account. Furthermore, there are a proliferation of tools—particularly cryptocurrency tumblers—which help users who know to use them to not only maintain their anonymity, but to launder stolen funds.

However, for average users, it can be challenging to maintain anonymity with crypto wallets, and users often inadvertantly “dox” themselves—making their entire transaction histories public. The consequences of this tend to be fairly minimal today (assuming the person is not engaging in criminal behavior). However, if cryptocurrency becomes more widely adopted and used more for goods and services in the real world, both the difficulty of properly maintaining privacy and the consequences of failing to do so will increase.

Finally, cryptocurrency projects are highly susceptible to a broad range of attacks. There are many reasons for this, including that financial systems running on a public blockchain, often with open-source code, lower the barrier to entry for attackers compared to more traditional financial systems. Crypto projects are also often “testing in production”: proving out not only untested code, but untested financial models, with real people’s money. The collapse of the Terra ecosystem in May is perhaps a good example of this—the financial model behind that “algorithmic stablecoin” turned out to not work in practice, and the project failed in a spectacular and tragic way. Software development standards tend to be low, particularly when compared to industries developing critical systems, and there tends to be little in the way of testing, auditing, or verification of code. There are also enormous incentives for attacks, and software developers are finding themselves trying to safeguard against state-sponsored threat actors.

The impact of both attacks and unintentional failures of cryptocurrency projects can be particularly enormous due to the highly-intertwined nature of many of these projects. As we’ve seen recently with projects and companies including Terra, Celsius, and Voyager, many crypto projects are deeply reliant on one another—both in software but also in terms of borrowing and lending—and the failure of a single token or ecosystem can have many times the impact one would expect due to exposure across the industry. As of yet we have not seen terribly much in the way of contagion to traditional finance, but as crypto continues to enter the mainstream, without proper regulation it will only be a matter of time.

Although adoption of crypto assets has increased in recent years, they still remain fairly niche. Some factors that are likely to speed adoption include: the emergence of more mature consumer apps that address the poor user experience of buying, trading, and selling cryptocurrencies; further adoption of cryptocurrencies into traditional finance (for example, via crypto ETFs, or the burgeoning trend of retirement funds embracing crypto); the adoption of cryptocurrency into more facets of society (for example, acceptance as payment at stores, as collateral for traditional loans); and government recognition and acceptance of cryptocurrencies.

When it comes to regulation, there must be a careful balance between protecting consumers while not exposing the financial system to systemic risk. Perhaps most importantly, the idea that we must take a light touch to regulation in order to not stifle innovation is overblown. The most impressive innovation we have seen with cryptocurrencies have been in separating average people from their money via new forms of financial fraud, or old forms of it that have been updated with a crypto token. Ransomware has flourished as a result of cryptocurrency, as have cybercriminals with various other specialties who have prospered thanks to this new industry of far too much money and bad code. Innovation in fraud and theft is still innovation, undeniably, but we must realize that not all innovation is societally good, nor does this kind of innovation call for light touch regulation, regulatory sandboxes, and the other kinds of favorable conditions that crypto firms and lobbying groups have been clamoring for.

When it comes to systemic risk, in my opinion we should be cautious in increasing the exposure of traditional finance to the regular failures of crypto projects. Stablecoins, for example, pose enormous risk to cryptocurrency as a whole, and some recent proposals to treat stablecoin issuers as banks concern me. The government should be extremely cautious in how it might put its backing behind tokens that are used almost exclusively to enable people to leverage up their crypto holdings in decentralized finance (defi) projects. I would point you to the excellent work of Professor Hilary Allen to provide much more detail on this point—in particular her statement on stablecoins to the U.S. Senate Committee on Banking, Housing, and Urban Affairs in December of 2021.

The same is true for aspects of cryptocurrencies beyond stablecoins. Fiduciaries should not be recommending crypto to their clients any more than they should be suggesting they diversify into scratch-off tickets, and I am horrified that retirement fund operators in particular are beginning to embrace the idea.

Clarity should be provided around the fact that cryptocurrencies are, broadly, securities, and they should be strictly regulated as such.

Much of the regulation should take place at crypto on- and off-ramps, such as the many crypto exchanges currently operating in the US. These are, in my opinion, the best place to impose limits on a somewhat challenging-to-regulate industry. No time should be wasted arguing over whether to try to “ban cryptocurrencies” as a whole, or regulate the software that people can write or execute—a ridiculous idea—instead, focus should be placed on where that software begins to do real harm to both individuals and the financial system, and that is where dollars are converted to crypto tokens and vice versa.

Thank you for your time and for inviting me to speak.

Excerpts from letters to the judge in the Voyager Digital bankruptcy case

2022-07-23T00:00:00+00:00

Background
Excerpts

People with funds locked in Voyager Digital have been sending letters to the judge presiding over the Chapter 11 bankruptcy case. These are excerpts from those letters.

It’s important to understand that schemes like this in the cryptocurrency industry are hurting real people who are often suffering losses they can’t afford. Regardless of what you may believe about individuals’ decisions to put significant amounts of money into Voyager, blame lies with the executives creating and running these companies and with the U.S. legal and regulatory system for allowing companies like this to operate.

The goal of highlighting these excerpts is to illustrate this, and shed some light on how people are convinced to put their money into projects like Voyager. Voyager may have been one of the first companies to collapse in the 2022 crypto crash, but it is hardly unique.

All case filings can be viewed on Stretto. Individual letters are linked alongside their excerpts. I have published similar excerpts on Twitter, and will be continuing to update as new letters are entered. New letters will go at the top of this post, which is in reverse order based on docket number.

Background

On July 1, 2022, the cryptocurrency broker Voyager Digital suspended customer withdrawals. On July 6, the company filed for Chapter 11 bankruptcy. Users have continued to be unable to withdraw crypto stored in their Voyager accounts. Some Voyager customers were under the impression that their funds deposited in US dollars were protected from a Voyager bankruptcy by FDIC insurance. Voyager had made statements like, “all customers’ USD held with Voyager is now FDIC insured. That means that in the rare event your USD funds are compromised due to the company or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000).”

Excerpts

Doc 323, filed August 22, 2022:

Thank you for be willing to read the real stories of myself and so many other Voyager account holders who had our lives turned upside down with the unexpected notice that all of our assets in Voyager were no longer available to us.

My wife and I are a married couple in South Florida and we are in our thirties. For the past years, we have been diligent in saving funds from our day jobs and we had our life savings invested in Voyager. We had researched Voyager and other crypto banks and Voyager seemed like the most well established and safest digital asset investment bank from what our research showed us.

We had $50,000 in USDC in Voyager and we were confident it was a safe investment. Voyager would constantly send us emails encouraging us that USDC was a safe place to store money and a good hedge against wavering crypto currency prices and inflation. …

We now have $50,000 in USDC and tens of thousands more dollars stuck/frozen in Voyager and we are so scared of losing it.

This series of events from Voyager has caused a major upset in our lives and we are without YEARS of hard earned money. We did all the due diligence possible and we trusted Voyager’s email campaigns and advertising that claimed USDC was a safe investment on their platform. We lost $50,000 in USDC which is a HUGE chunk of money for us and life changing.

Doc 260, filed August 8, 2022:

I am a newly retired senior citizen that has recently been hit hard from every side. Times have been tough recently. I listened to younger friends and family, who thought they were trying to help me. I was hopeful as I tried to learn and understand new technology and service.

Honorable Judge Michael E. Wiles, I am asking for my Assets to be returned to me, the market value is down and so It it less costly for Voyager to just release them. I would like to have my assets in-kind returned and hope that maybe, just maybe, I can recoup something back. My assets are (type and units) on Voyager:

VGX 37.98 [~$13.28 on date of filing]

BTC 0.000525 [~$12.16 on date of filing]

DOT 36.634 [~$326.30 on date of filing]

LUNC 230,296 [~$23.17 on date of filing]

LUNA 3.52 [~$6.09 on date of filing]

USDC 2.93

Doc 232, filed August 4, 2022:

I had transferred $49,000 + from my bank savings to Voyager to act as CUSTODIAN of my account which was held in USDC (a stable crypto asset tethered to the US dollar). By no means was this any type of liquidity pool, staking nor capital liquidity program.

Voyager was to solely act in a custodial role to function as my securities intermediary. Therefore Voyager does not have any rights/claim to my crypto assets as precedent in re Joliet-Will County Community Action Agency and Article 8 of UCC mirrors these rules for financial assets held by such a securities intermediary.

In conclusion, I would Object to Voyager holding onto these customer assets as they have no claim to them, they were fraudulently solicited, and liquidating this broker-dealer would be most appropriate to protect the customer accounts.

Doc 224, filed August 3, 2022:

I am a loyal Voyager customer since April 2021. Specifically, a Navigator. Navigator is Voyager’s highest tier in their Loyalty Program… I became a Navigator on June 29th, 2 days before the news got released via email and Voyager’s Twitter account of the platform being suspended for trades, deposits, withdrawals, and loyalty rewards.

My intentions for buying/adding crypto assets were to hold all of them long term as I believe in blockchain technology and the projects associated with the assets I valued and bought in Voyager’s platform. The $54,000 + US Dollars I invested in platform to buy crypto assets was for future financial growth. I held that cash for a very long time before committing to invest it all in their platform while the market was down to increase the possibility of profitability while managing risk tolerance. I spent a great amount of time, patience, and strategy to build on my financial future and to learn that my work can potentially be taken away from me by a company I trusted, a publicly traded company, who has a great platform, a strong balance sheet, and had a great reputation, is highway robbery, and in a nutshell fraud.

Doc 188, filed August 1, 2022:

I am one of the many Voyager Crypto users that entrusted the company with my hard-earned & long saved investments. I was well aware of the high risk to cryptocurrencies while investing and did my best to mitigate the risk by utilizing larger exchanges & companies with my investments. However, like many others, I am now without access or control to my money/crypto. The risk I didn’t foresee was the failure of some of the largest companies in the industry to fall with any large shift in the value of cryptocurrencies.

Doc 172, filed July 29, 2022:

I feel I represent the average customer who believed the Voyager platform was safe to invest on and hold for long term. They claimed or at least threw around the term FDIC insured, so why wouldn’t I think my money and investments would be safe? I definitely feel mislead, as I’m sure all customers do at this point. I have lost retirement money in the sum of over 25k… I don’t claim to know a lot about crypto, but I feel that in some ways it could be worth investing in the future. After hearing about Bitcoin years ago and missing the boat, I wanted to invest in crypto…. Thank god all the people I told about joining Voyager did not do it. I would feel worse than I do now. Losing my money hurts enough w/o friends and family losing money too(because of me). I have not revealed my total losses to anyone. I feel ashamed that I fell for something that truly seemed legit.

Doc 164, filed July 26, 2022:

Beginning on Sunday 08:08 AM July 25th, 2021, I was encountered by an intricate online scammer which was unbeknownst to me at the time. The scammer managed to gain access to my voyager account, email, and bank account. I became aware of this as late as September 28th, 2021. Since then, I have been working tirelessly to have transactions reversed. I even submitted a ticket to the voyager team through the platform explaining that I was compromised, and I never received a reply… I am aware that FDIC will kick in to assist users financially. I am hoping I too will be considered due to the very unfortunate nature of what has occurred to me. I have lost my entire life ssavings.

Doc 155, filed July 27, 2022:

At the moment, a majority of my lifelong assets, accumulated through some ups and more downs as an entrepreneur, are locked on Voyager with no telling if, when and how much of them I will gain access to again. My savings to buy a home, build and support a family, and invest in my future, are all locked away in that account. Yet, I must consider myself fortunate: many other Voyager customers have expressed in online forums their contemplation of suicide, having no money to make rent or pay for their daughter’s college education…. As anxious and sick to my stomach as the thought of what has happened makes me, I cope by reminding myself, “it could be much worse.”

Doc 150, filed July 25, 2022:

I currently have around 31K frozen on the Voyager exchange. Losing this money with no end in sight has been unbearable for my family and I. 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. My anxiety has been a struggle. Having hope one day, and the next day have it dashed away.

Doc 146, filed July 25, 2022:

I have spent years saving, investing, + trading crypto assets to build what was a life changing amount of money that I would one day sell to provide college + other needs for my family. I … had deposited 100 ethereum [~$160,000 on date of filing] on to Voyager Digital’s trading platform. … My family’s future is ruined if they just get to not return my assets. Even if I’m only given half back + then years later given or paid back the rest to me, this will ruin my future, my dauther’s future + cost the government hundreds of thousands in capital gains I would pay when I do plan to sell. My plan was to stake my ETH when Eth 2.0 went live earning my family income to progress on.

Losing 100 ETH will ruin my family. At market peak that was 480,000 dollars + I was waiting for next cycle to sell out. They are stealing basically at least 1/2 million dollars value from my family. Even if they work out a payment plan to pay us back. I’m on board with that, we just can’t afford to lose 100 ETH that took 6 years + thousands of dollars of savings. My life’s savings would be wiped out.

Doc 142, filed July 21, 2022:

I am sincerely asking for the best possible remedy and “financial relief” and compensation due the severity & impact the organization Voyager has had & the negligence use of its customers’ purchases and funds in addition to the restriction of access & withdrawals. My purchases are of crypto-currencies are a estimated worth of $ 100,000.

I am a victim of crpto-currency fraud & believe Voyager Digital is operated by civil fraudulent criminals who lured customers with false advertising and since have altered all of their business information online & are strategically attempting to rob its account holders and investors and proclaims to be bankrupt but is still operating business while also paying its staff and lawyers.

Doc 124, filed July 20, 2022:

I write as a customer of Voyager, a technologist, and a believer in the mission and potential of blockchain technologies, particularly bitcoin and ethereum.

… I became fundamentally sold on the value proposition of bitcoin and ethereum and decided to invest a majority of my savings into both, in light of several sovereign countries introducing cryptocurrency securities as recognized securities.

I made these purchases on exchanges other than Voyager. However, when I came across Voyager’s online marketing, YouTube video promotions and CEO Steven Ehrlich’s interviews of promising FDIC guarantees, well vetted investments, being a publicly traded company; I opened up an account and gradually transferred nearly all of my assets to Voyager.

I performed extensive due diligence prior to transferring my securities as millions as well did also. I ultimately chose Voyager for the following reasons: The company was publicly listed, implying responsible stewardship of my assets. CEO, Steven Ehrlich, positioned as an industry veteran, working in the capital markets for more than 25 years and achieving the role of CEO of E*Trade Financial’s Professional Trading division. Voyager claimed to have full FDIC protection on USD balances.

Doc 123, filed July 20, 2022:

I signed up with Voyager last year based on its trust factor and noting that it was customer-focused as well as a publicly traded company. The money that my wife and I were hoping to use for our young daughter’s education in the future is now locked up.

Doc 122, filed July 21, 2022:

In the world I live in, I am a small person with mostly small pockets. … I ask on behalf of my four children that still have college unpaid, that you are our voice and our ears throughout this court case and that the government fairly represent and hear us.

My family worked for over 24 years to build a family business together that was all our blood, sweat, tears and that took us away from our families for years. We worked hard and long for those twenty-four years. In December of 2020, we sold our family business for a small share for each of us (five owners). I took about ½ of my proceeds from the sale of our company and put it into Voyager on their crypto application. I felt that the money, based on their claims, was safe, FDIC insured and that I was making an investment for the long term.

I have four children aged 16 years, 12 years, 11 years and 8 years old currently. That money was an investment into their futures to pay for their college. I put over $350,000 into USD coin because of the promises of “safety and security,” from Voyager and 9% interest and “FDIC insured,” USD coin. I also put over $700,000 more in Bitcoin and Ethereum that are now decimated, but that’s on me. I take responsibility for investment and risk, but the Voyager leaders and Voyager Digital, LLC needs to take responsibility for giving us back what we are due, in full.

Doc 114, filed July 20, 2022:

I am a current customer/depositor of Voyager who has been investing a major portion of my savings into cryptocurrency using Voyager services. I now feel regretful for believing into their marketing strategy and potentially losing my family’s life savings.

Doc 109, filed July 20, 2022:

I … am a “small investor” & account holder of “Voyager Digital” crypto currency exchange platform and a victim of crypto-currency fraud. … After signing up with the crypto currency exchange app and purchasing a variety of crypto currency coins such as “Bitcoin , Avalanche , Dogecoin, and Shiba ” on the crypto-currency Exchange platform.

As a hard working single mother and small investor , I initially used the exchange as a form of a savings account and invested a substantial amount of my savings to purchase crypto currency on the Voyager exchange platform in hopes of saving up for a home, but the opposite has happened, I feel as though , I’m being strategically robbed in a civil way by Voyager Digital . The negligence of this organization has greatly impacted my life and the future of my child’s life.

I’m very worried that this will have an effect on the condition of my life and my state of living for a very long time. My cognition has declined rapidly due to depression because I’m barely able to afford the cost of living and have very little cash left in case of a financial emergency & As a single mother with no family support and without a lucrative career. I may never be able to financially recover from the losses this organization has caused.

Doc 108, filed July 19, 2022:

I write as an unsecured creditor who has deposited her entire life savings into the USDC stablecoin under the consistent confirmation of CEO Stephen Ehrlich that we owned our assets. I would have NEVER in a million years taken my hard earned money and put it into an asset that I believed I was not the custodian of. I am not a gambler; the USDC stablecoin does not fluctuate from the US dollar and is “regulated and licensed by institutions that maintain full reserves of the equivalent fiat currency in a 1 USDC : 1 USD ratio.”

Doc 105, filed July 19, 2022:

I appreciate your consideration in reference to my cash holdings in my Voyager account. I have sold all my crypto assets in April of 2022 and attempted to withdrawal my cash of $193,585.89 and for reason of compliance review they have blocked my withdrawal and when I asked as to what the issue is or what is reason of compliance review they never provided me of a reason.

Your honor I hope you can see that my claim is fair and should have been honored in May and they dragged me on in the name of compliance review and locked my account.

Doc 93, filed July 18, 2022:

We have USD totaling over $110,000 with Metropolitan Commercial Bank via Voyager that has been frozen from being withdrawal since July.1st.

Doc 92, filed July 18, 2022:

I was told about Voyager on April 16th, 2022. I was told of the great yields for holding crypto currency and stable coins on the platform. I was a little skeptical at first but did my own research. Afterall what could go wrong? It’s a U.S. company and publicly traded. I began making large transfers into the platform and converting my USD to USDC a stable coin pegged ot the U.S. dollar. Everything should be ok right? I was unaware of Voyagers fraudulent lending practices as well as their financial situation. I now have over 138,000 of my family’s life savings tied up on the platform and in jeopardy of losing. I have barely spoke with my wife as she is extremely disappointed in the decisions I made for our family. Why should I take the blame and suffer for some careless mistakes made by a few corporate individuals?

Doc 77, filed July 15, 2022:

I am current customer of Voyager who has been investing a portion of my paycheck into Voyager every month for the last few years on top of rolling my life savings into this account. I used Voyager to replace my savings account as it was advertised as FDIC insured, I am now filled with regret for doing so and fear that I pretty much lost everything for trusting this company.

Doc 75, filed July 14, 2022:

I, personally, did not simply deposit my hard earned funds into their custody on a ‘whim’ to ‘gamble’ in blond hopes of somehow ‘magically’ becoming a billionaire. In fact, I did my very best to perform ‘due diligence’ throughout the massive amounts of public information on the internet. From thoroughly reading dozens of “Best of Cryptocurrency platforms” 2021, 2022, etc. To “Pros and Cons of Voyager crypto”. To “Why is Voyager Digital safe”. To “Voyager Digital leadership”. Throughout each and all of the many links, articles, information, reviews, and recommendations, it seemed like Voyager Digital was presented as “the closest, most safe, non traditional banking platform_ but for the cryptocurrency world”.

Given the current horrible situation we are now facing with Voyager Digital, it seems evident, purposeful misleading advertisement from Voyager was regurgitated to us interested consumers…

For me personally, Voyager, purposefully made it so that I was suddenly unable to withdrawal all of my holdings (usd, usdc StableCoins, and cryptocurrencies) rapidly & efficiently in accordance with my $100,000.00 daily withdrawal limit… allowing only $10,000.00 daily. Just prior to Voyager ‘freezing’ my account holdings, Voyager accepted, allowed, and processed 6 daily $10,000.00 withdrawals = only $60,000.00 versus the just prior 6 daily $100,000.00 daily withdrawals = up to $600,000.00… Manipulating/keeping $540,000.00 from rightfully being withdrawn.

Excerpts from letters to the judge in the Celsius Network bankruptcy case

2022-07-22T00:00:00+00:00

Background
Excerpts

Content warning: Discussions of suicide.

People with funds locked in Celsius Network have been sending letters to the judge presiding over the Chapter 11 bankruptcy case. These are excerpts from those letters.

It’s important to understand that schemes like this in the cryptocurrency industry are hurting real people who are often suffering losses they can’t afford. Regardless of what you may believe about individuals’ decisions to put significant amounts of money into Celsius, blame lies with the executives creating and running these companies and with the U.S. legal and regulatory system for allowing companies like this to operate.

The goal of highlighting these excerpts is to illustrate this, and shed some light on how people are convinced to put their money into projects like Celsius. Celsius may have been one of the first companies to collapse in the 2022 crypto crash, but it is hardly unique.

All case filings can be viewed on Stretto. Individual letters are linked alongside their excerpts. I have published similar excerpts on Twitter, and will be continuing to update that thread and this post as new letters are entered. New letters will go at the top of this post, which is in reverse order based on docket number.

If anyone is looking to submit a letter of their own, this Reddit post seems to explain how.

Background

On June 12, 2022, the cryptocurrency lending firm Celsius Network suspended customer withdrawals, swaps, and transfers. On July 13, the company filed for Chapter 11 bankruptcy. Users have been unable to withdraw crypto stored in Celsius accounts. Users with loans open are still having to add collateral to maintain their loans, despite not knowing if they’ll be able to retrieve their collateral. Some have been forcibly liquidated even though they intended to add collateral to open loans, due to needing to go through the overloaded Celsius support team.

Celsius offered both “Earn” and “Custody” accounts. With Earn accounts, users received a percentage rate of return either in the $CEL token or in the same tokens they were holding. In April 2022, Celsius stopped allowing non-accredited investors in the United States to keep Earn accounts, in order to comply with U.S. regulations. With Custody accounts, coins are stored and could be transferred, swapped, or used for loan collateral, but did not accumulate the rewards of the Earn accounts.

Excerpts

Doc 708, filed August 2, 2022:

I am a 65 year old retired man writing this letter in the hopes that justice will be served for myself and many others who have lost their investments. The majority of my life savings were deposited in Celsius with the understanding my funds were secure. The rest of my life has been drastically changed because of of the misinformation and outright deception by Celsius CEO Alex Mashinsky.

I have worked since I was 15 years old, and have saved my earnings, sacrificing and pinching pennies for the last 50 years. Now, upon retirement I have found that most of my savings are being withheld from me by Celsius- just two weeks after my new marriage! Just as our honeymoon began with high hopes for the future, news came that my funds had been frozen. Since that fateful day (June 12, 2022) I have felt devastated and betrayed. The outcome of this case will have enormous long-term consequences for me, my family and my overall state of mind.

Doc 703, filed August 24, 2022:

I’m a Celsius customer with a total of 4.47 BTC [~$90,000 on date of filing], 53 ETH[~$84,000 on date of filing], and several other alt coins on the platform. I worked over 4 years to build up that amount and I trusted Alex with my lifesavings. As I’m sure you’ve heard from numerous customers, Alex had weekly AMAs and just days before freezing customer accounts, advised customers that everything was fine and there should be no problems withdrawing money. Telling customers, they were not making risky trades and that Celsius was safer than a bank account. This ended up not being the truth. As a licensed police officer who helps victims of fraud, I don’t see how this is any different than what happened with Enron.

Doc 698, filed August 4, 2022:

I’m glad I didn’t put everything in Celsius but with what I did I stand to lose almost half of my retirement savings.

Doc 661, filed August 25, 2022:

Between September and November, 2021 I put up 8.16 BTC as collateral for loans totaling $75,000. I made these informed financial decisions based on several factors, including social media messaging which I will highlight some examples of below…

For my sake, I have a son who was born this year, and have been living under very low income due to Chinese lockdown policies. Our only way of weathering the storm was taking out loans from Celsius, and now that the principle is nearly gone my wife and I are under and immense burden to make a living and take care of our baby.

Doc 659, filed August 31, 2022:

Currently, I have about $3,500 worth of BTC in my Celsius account. I will be okay and it won’t break me. But, I encouraged my father-in-law and mother to submit crypto to Celsius. They have a total of about $7,500 worth of crypto locked in Celsius. That is what really bothers me… I led my relatives down this path and I will pay them back every cent. But, this is truly a dishonest thing done by Alex and the Celsius team. They have ruined many lives and I pray to God that nobody has committed suicide over this.

Doc 654, filed August 2, 2022:

I am a customer who unfortunately trusted Celsius. I have sold all my stocks, withdrew all my savings and refinance my house to invest in Celsius for the future of my family and my own. In many interviews and articles, Alex consistently ensured and convinced everyone that Celsius was a transparent and legitimate option for long term life investments. Constantly advertising themselves to be a superior options to banks, this misdirection has caused myself and many others to befall a serious financial crisis in the middle of this economic downturn.

Doc 653, filed August 3, 2022:

I am a 69yo, widow, who deposited my crypto into Celsius. BTC 4 [~$91,300 on date of filing], Eth 15 [~$24,300 on date of filing], Polygon 2200 [~$2,000 on date of filing], etc., I understood the risk that the value could go down. The volatility of crypto currency is apparent. I didn’t sign up to be scammed, in a structured Ponzi scheme. I will never be able to accumulate any wealth at my age, I’m old. I will have to go back to work, if I can find work, if I can manage my health to be able to work. I cannot survive on $1500 a month social security check. The importance of this investment, would bridge the gap in my income for survival in high inflation and recession. The devastation to my life situation is irrepairable, its despair, hopelessness, its failure, a slow death, that eats at you every minute of every day. It takes your heart, mind, soul and body. I have become a shell of a person and obsess on how to fix it. Maybe I should go to the southern border and get a job. It’s crazy, I have never crossed to the dark side, but desperation can make you do and think strange things, especially when you are alone and in despair.

Doc 652, filed July 26, 2022:

Some of the Investors who invested with Celsius are the private-equity firms WestCap and the Canadian public-pension giant CDPQ which is one of the largest Pension Funds located in Montreal, Quebec Canada. CDPQ is valued at over $420 Billion dollars and has been in operation since 1965.

Seeing that companies of this magnitude invested with Celsius gave me the indication that Celsius is a good safe investment. I say this because these companies went through an extensive due diligence process to ensure that Celsius’s books are what they claim them to be and that their business model is sound in order to ensure that they would be given a greater and better return than investing elsewhere and the risk level would be extremely low as per what was being preached by Celsius. These investors had access to company records, reports, balance sheets…that the average customer like myself would never have access to. Upon completion of their due diligence process CDPQ investied $150 Million dollars with Celsius which would be a good indication that Celsius is what it claims to have been or so they mislead everyone to believe. Alex Mashinsky did an interview with CNBC on April 13, 2022 where he mentioned that they just finished a $750 million dollar round of funding and how Celsius is fully transparent. These investors went through a thorough due diligence process and everything is what Celsius claims it to be.

I would like to provide you with an example of how some large Investors perform their due diligence process. There are a few Real Estate Moguls that I follow on Youtube by the names of Grant Cardone and Ben Mallah. Grant Cardone has a Real Estate portfolios worth about $3 Billion and Ben Mallah’s is around $250 million dollars. When Grant or Ben are looking to acquire Real Estate properties their “Modo” is that they let the banks do their due diligence process for them. …

How I came about to investing into Celsius over traditional investing options. I have a 22 month old daughter, my first born child, and with the money we received from her first birthday, Christmas, Easter and other holidays we had it sitting in a bank account and decided that instead of having it sit gaining 0% interest we should invest it for her schooling so when the time comes she has enough to afford it. We had appointments with a few banks and other fund managers on different types of investments we could put it in like government funding programs and so on and the rate that we would receive. Now some of these investments had restrictions on when the money could be taken out and for what purposes and any penalties that went along with that. I then came across Celsius and as I mentioned above seen it as a great investment and a much better one with no penalties for early withdrawal or restrictions on what the money could be used for. So based on my overall assessment of Celsius we decided to invest her money not knowing that we were being drawn into a “Ponzi” scheme if I can use that term. I am torn because the amount of money that I have invested is not something I can recoup back from working and saving especially with the economic situation we are all facing right now.

Doc 650, filed August 25, 2022:

First a little about me, I am an almost 50 year old laborer with a high school education working in a small shop in Salt Lake City. I have been scrimping and saving for over 10 years now trying to plan and prepare for some semblance of a retirement. During that time I was able to save approximately $165,000 which cost me much sacrifice and toil.

I do not and have never owned my own home, I do not own a car, I shop at second hand stores to save money. I use the public transit system and a bicycle to commute. Just to give an idea of my extreme efforts to secure my future.

After I learned about Bitcoin, crypto and eventually Celsius I became a real believer. This looked to me my best and possibly only shot at becoming a homeowner and retiree. So, I put some BTC and ETH in Celsius and began earning rewards, it was the first and only time I had ever experienced passive income. I went all in … 100% of my savings followed by everything I had left over after each check.

Once I started watching the AMAs (ask me anything) I became even more sold on Alex’s ideas and the Celsius mission. Told family and friends, convinced some coworkers to open accounts at Celsius. It was working and getting better all the time. Or so it seemed.

As I type this letter my $165K investment is worth approximately $240K! More money than anyone in my family has ever had. At the top of the market my account exceeded $750K! Today it all seems so unreal and I lament my ignorance in all this.

It’s very somber for me to look at my account knowing that I no longer have access to any of my savings and to hear all the heart wrenching stories like mine and worse.

All this to say, I was fooled!… tricked by Alex in his AMAs where he assured me that my crypto was safe, safer than if it were held in a bank.

Doc 648, filed August 26, 2022:

I am writing to you in regards to the Celsius Network bankruptcy. I am 70 years old, retired and living on social security. In 2020 I opened an account with Celsius Network and deposited my Bitcoin and Etheiium into this account. It was my understanding that in return for depositing my coins with Celsius I would earn a certain percentage, paid out weekly in kind to my account. …

Loosing access to my funds has taken a toll on me physically and mentally. Your Honor, I have worked hard all my life and it has taken me years to save this money. I don’t understand how this can be allowed to happen. Celsius Network was operating in New York and New Jersey which are under SEC rulings. The SEC has been so stringent regarding cryptocurrency regulations yet this was allowed to happen.

Doc 646, filed August 31, 2022:

I have a mid-six figure cash amount of cryptocurrency ($401,540.63 plus $231,518.35 collateral minus $150,000.00 loan - at today’s prices) stored on the Celsius wallet along with a $150,000.00 USDC loan secured by 10.88 Bitcoin as collateral. …

The first issue is regarding my loan. After my account was frozen, Celsius began sending me emails that my collateral is close to being liquidated and that I need to send in $150,000.00 in either cash or USDC to payoff the loan so that my Bitcoin would not be liquidated. They told me that I could not use any cryptocurrency that I had on my account to pay the loan (because funds were frozen) and that I needed to send in fresh funds. I did not have $150,000.00 liquid, so I borrowed the money from my brother. He wired me $150,000.00 and I uploaded the funds to Coinbase to convert the funds to USDC to create a trail. Coinbase held the USDC for six days, then I was able to release the USDC to Celsius. During the six day waiting period, I was in communication with Celsius and they told me that there is a note on my account that the funds are on the way and my collateral would not be liquidated. Once the USDC arrived in my Celsius wallet, I was told that I was not close to liquidation of my collateral. Bitcoin was over $23,000.00 and my liquidation price was $17,223.12. I then asked for my USDC to be returned, since I didn’t need to pay off the loan, and they told me that all transfers were frozen. I explained how my situation was different and then Celsius went silent. …

Every week they would be “bragging” how Celsius was growing and opening offices throughout the world, hiring top financial and technical minds (who they introduced in the AMAs) and how they were in desperate need of more engineers, etc. to handle their growth. They had a huge presence at this years Bitcoin Conference in Miami plus had a tremendous afterparty when the Bitcoin Conference was completed. It all sounded and seemed amazing. The “NEW WAY TO BANK”. It now seems to be nothing but a Ponzi scheme where management gambled our investments away on risky cryptocurrency coins like LUNA along with derivatives, etc. and lost their shirts… our shirts. They had no right to do that. It is a criminal act.

In these AMA chats, Alex Machinsky confidently described how “safe” our funds/property were in our Celsius wallets and that Celsius could immediately liquidate all funds/property to customers if necessary. That was an out and out lie and if every dollar is not returned to all customers, he should be criminally prosecuted for running a Ponzi scheme and I would be very happy to testify against him. If I don’t receive my funds/property back, he will have destroyed my retirement.

I am 61 years old and this is a tremendous chunk of my retirement.

Doc 644, filed August 22, 2022:

I have 21 small loans with Celsius which I have listed below. … Like many others, I admired [Mashinsky’s] goal to help the ‘little guy’ so I deposited all my crypto funds I had amassed over several years of hard work. …

As many others who believed in Celsius and Mr. Mashinsky’s vision, I placed my trust in his words. Being a former housewife with very little social security coming to me, I worked for several years volunteering for overtime on my job to gain additional money to invest in cryptocurrencies. In hopes of having a retirement nest egg, I invested every portion of my income beyond living expenses. I trusted that Celsius was a safe place to store and protect my future retirement money. To now find out that my assets, which I worked so hard for over the past few years, may be lost due to mismanagement is devastating and like so many others, I often cannot sleep at night worrying how I will survive in the future.

Doc 623, filed August 18, 2022:

I am a beneficial owner of two Celsius accounts, one in my name … and one in the name of an LLC I set up for my family’s benefit… I am a US citizen and an accredited investor. I have never borrowed from Celsius. My funds were deployed on Celsius to earn yield. At the time Celsius paused withdrawals in mid-June, the total value across both accounts, expressed in US Dollar terms, was approximately $2,500,000. The bulk of the value is held in Bitcoin (BTC): I have about 100 BTC across the two Celsius accounts. Some Ethereum (ETH) and other assets make up the remainder.

In my day-to-day life, I am a technology and life sciences entrepreneur and investor. I attended Harvard Law School, where I have since taught for some years in the fields of privacy and venture capital. After law school, I clerked for Chief Judge Danny J. Boggs of the Sixth Circuit Court of Appeals in the 2005-2006 term, but I am not a lawyer; I never took the bar, as my mother reminded me many times. …

By now you will be well aware that Mr. Mashinsky represented many times over the years, in public statements such as webinars, that Celsius was in a position of excellent financial health. You may also be interested to know that he made similar representations privately. For example, I sent him an email in June 2021 asking “Of course I read the rumors that Celsius has been ‘endlessly rehypothecating.’ Please tell me (us): are we safe with Celsius? You guys solid? Please give us a good, clear signal.” He replied the next day saying “Yes you are safe. We are profitable and have no losses.”

Doc 611, filed August 25, 2022:

I am writing this amicus letter as an expert in the cryptocurrency space, with nearly a decade of experience in the technology and criminality that infests it. …

I hold no cryptocurrencies and do not have any economic interest in the Celsius bankruptcy proceedings.

However, I can’t stand idly by when there appears to be a significant deception being perpetrated on the court by the management of Celsius. The cryptocurrency lending/borrowing side is clearly insolvent and quite possibly an explicit Ponzi scheme (and certainly an investor in major and obvious Ponzi schemes like the Anchor protocol).

In an attempt to postpone liquidation, Celsius has tried to claim to the court that their cryptocurrency mining business has the potential to be substantially profitable. Unfortunately Celsius’s own filings and basic economic analysis of the cryptocurrency mining space shows this, at best, to be wishful thinking. And, at worst, a fraud on the court.

Doc 575, filed August 22, 2022:

I live outside the US, in The Netherlands. I have put a part of my saved money in crypto at Celcius, because it was presented to us as a real save haven - “Unbank yourself”. Same for some family members and friends. However, it seems we were mislead, and all that was promised is not true. Can you please help us in getting our crypto back? Although for some people it seems not much, for us it is. It cannot happen that Celcius management will get their bonuses , paid from our saved money….

Doc 573, filed July 29, 2022:

I currently have my retirement account valued at $3MM USD tied up as collateral on a 1.15MM USDC Loan, which Celsius is requiring repayment as per the contract term. However, I fear that Celsius may try to liquidate my asset if the loan payment is not made, and therefore, I would like to request that Celsius’ demand for loan repayment without their commitment to release collateral be investigated.

Doc 572, filed July 28, 2022:

I have a life savings tied up in Celsius Network which I was hoping to use in the near future in order to place a down payment towards a mortgage. This all appears to be a distant dream given the recent news regarding Celsius Network filing for Chapter 11 Bankruptcy.

Doc 569, filed August 6, 2022:

I am one of the depositors in Celsius I have my life-saving funds currently locked in the platform. I am still feeling confused, having mental trauma and the current Celsius situation has gotten myself into a financial constraint that somewhat changed and restricted my usual day to day life. With that, I am seeking help urgently from you, as I am feeling helpless at this very moment.

Doc 568, filed August 7, 2022:

My name is … of the United Kingdom and only a few month ago was planning my forthcoming retirement. I have been an account holder at Celsius for nearly 3 years.

May I first start by saying it is a difficult task writing this as I feel embarrassed from the predicament I have found myself in. I relocated back to the UK after, over 20 years in abroad, just a few weeks before the Covid pandemic started and lockdown across the UK came into force. With the extreme isolation & lack of any social network I found myself somewhat desperate to change my situation and susceptible to financial advice given by Alex Mashinsky who presented himself as financial genius who has lead several billion dollar companies. He developed his image as a family man and a champion for the Celsius community, a real Robin Hood of our times and mentor to the ordinary folk who what to change their fortunes.

Since December 2018 I have been accumulating Bitcoin and Ethereum. Later investing the remaining capital left over from selling my house a few years earlier. I have hodled through the fluctuations in price as a believer in the principles of Bitcoin and the future it looks to bring. I have been living extremely frugally over the last few years and invested every spare penny I could muster into these assets. Going as far as delaying an operation my partner needs to remove a growing tumour and living in a small rented flat until I reached my goal of being able to afford to at least semi-retire, buy a house and the operation she needs, which all seemed within reach not so long ago.

Having a relatively low paying job and as a single father, for me, investing has been a struggle. To help speed up this process Celsius were offering interest on my crypto assets. Promoted as safer than banks it gave me the opportunity to accumulate where my salary was unable contribute much. Along with a loan to buy more crypto that Alex Mashinsky on his YouTube channel advised was the best way to further grow wealth. I was lead to believe Celsius primarily generated profit from interest made in the lending business, the profits generated would then be paid to the community, the investors, as interest instead of to shareholders at a bank. This made sense to me and as all loans were said to be fully collateralized it appeared to be a safe and ethical business model.

Celsius took my last deposit of approximately 1.6 BTC [~$36,800 on date of filing] early June 22. I scraped this from various other wallets to safeguard the loan I had from getting liquidated after the BTC price dropped suddenly and after another loan (using my Cel tokens) got liquidated, costing me that entire balance. I intended to withdraw other crypto in my account, mainly my ETH and USDC balance, so as not to have all my eggs in one basket and leave me with some funds on hand. However it was late at that moment so to avoid a potential mistake processing a withdrawal when tired, I left that task till the following day. This next day however turned out to be the day they stopped all withdrawals; leaving me in the horrific position of having my entire wealth tied up in one account at Celsius. I am now penniless, with Celsius holding my entire life savings in the form of around 7 BTC [~$160,900], 62 ETH [~$105,000 on date of filing] $7000 USDC and some smaller balances of other crypto tokens. I was close to retiring but instead, now left with nothing other than the meagre salary from the job I was hoping to leave. I have a flight booked to visit my partner after being separated in different countries for the past 2 years, from the covid travel restrictions but now with little money to fund my other travel and accommodation expenses.

I feel betrayed, lied to and left devastated. I have watched my wealth drop from its highs around a year ago which was just a small step from allowing me to semi retire, buy my house and help with my partners operation to absolutely nothing. Sleepless nights, racked with guilt and blaming myself for my stupidity, these last two months have been agonizing.

Doc 566, filed August 1, 2022:

My family has the following funds/Coins in Celsius accounts.

BTC (Earn) ( Dad) 4.1306 [~$96,600 on date of filing]

ETH (Earn) (Dad) 4.146 [~$7,000 on date of filing]

LTC (Earn) (Dad) 19.142 [~$1,100 on date of filing]

USDC (Custody) (Mother) 199,925

USDC ( Earn) (Mother) 102,360

BTC (Earn) ( Self) 1.012 [~$23,400]

ETH (Earn) (Self) 30.423 [~$50,500]

I am writing you to request we should be able to immediately withdraw our assets from Celsius “in-kind” (1 Bitcoin for 1 Bitcoin). My parents are retired since 2016 and have a substantial portion of their savings in Celsius. My dad is 75 years old and my Mother is 69 Years old. They both have major health issues and need funds to take care of medical bills and daily life expenses with soaring inflation in USA. My dad and mother are both accredited investors with Celsius. I believe the Celsius investors and Alex Mashinsky have misled the customers and they now have an obligation to make depositors whole. Many lives have been destroyed by Celsius. Celsius should not be currently paying themselves millions of dollars in payroll.

Doc 564, filed August 1, 2022:

The most recent event of locking our funds has caused immeasurable suffering and pain to many of the depositors and though i cannot share the grievances of all, i, for one, have had to deal with incapacity to fully execute the care required for my aging parents due to the locked funds in my Celsius platform.

It is one of the worst and painful feelings in the world to be strip off the duty (filial piety) to help your loved ones and i hope i would be given the power to resume that again. …

P.S. I have also included some screenshots from my emails with Celsius who have neglected the needs of someone in dire need of help, however little. Their recent actions are more self-serving and have completely neglect of the roles and responsibilities of a company who are sincere in helping their depositors.

Doc 563, filed July 30, 2022:

This is my state of mind, Your Honor : here are pictures of my house that I am renovating alone. I had planned to hire a professional building firm to do this work and enjoy my vacations. However, the situation with Celsius locked all my funds made me less financially confident to make this through professionals. So, I am doing this myself alone with basic tools and equipments at high risk.

I am one of the victims of the Celsius Network case. I have tens of thousands of dollars held on my Celsius Network account.

Doc 560, filed July 28, 2022:

Why on God’s green earth are Mr. Mashinsky, Mr. Goldstein, and Mr. Leon able to take a salary at this point?

I have a small fortune/seven figures in $ deposit on Celsius and before God and country, I ask you to make sure the people who cannot eat or feed their children or are sick and cannot pay their medical bills, get their money before mine. I am willing to wait a year and not see a penny if those people are paid first. If I can do that, why cannot self-proclaimed billionaires and centimillionaires not take a salary for a year? Frankly, is this salary request by “top brass” at Celsius a joke (adjective with a capital F deleted with respect to the court).

Doc 559, filed July 27, 2022:

My life savings are on Celsius (3 Bitcoin [~$68,800 on date of filing] and 10 Ethereum [~$16,400 on date of filing]). It took me years after a ruinous divorce to make the money to purchase my Crypto and a whole year of researching the best place to put it. Like all the others I believed Alex Mashinsky was an honest man. I was deceived.

Doc 558, filed July 26, 2022:

I currently have around $12,000 in value of crypto on Celsius earn account. I’m desperately hoping to regain my investment in the form of cryptocurrency holdings as it’s a scary place to be entering a recession and economic downturn. My ultimate goal was not to enrich myself, but to help elevate my family which includes my wife and one year old son live a better life.

Doc 557, filed July 25, 2022:

My wife and I became members of Celsius in 2020 and along the way we have invested a lot of hard earned money into the Crypto space for Celsius to hold Securely and Safely. We were told by Alex himself thru AMAs that it was safe and accounted for. After hearing about the bankrucpty my heart sank, our hard earned funds were now gone, gone to a company/team that will probably get nothing more than a slap on the wrist.

We need this team to be held Accountable for their lousy actions and high levels of risk with their customers money. My depression has had my family worried, the money was to be used next year for my wifes pregancy bills and for our kids college funds is now gone.

I am requesting we get the complete amount of fund back into our accounts and not some dollar figure from the day of bankrucpty. Please start from the bottom of the totem pole as us small guys need this more than the massive funding companies. This was our SAVINGS/RETIREMENT funds that they had stolen from us. I pray that you will do whats best for the average person trying to make it through life, not just in the US, but world wide!

Doc 556, filed July 25, 2022:

Celsius has kept my funds in a earn account after writing me a emailing me telling that my funds would be in a custody account as I am not accredited investor. Celsius has $45,000 of mine.

I humbly reguest you order Celsius to refund my money as im in a military and my wife had a stroke. We need the money urgently;

Doc 555, filed August 20, 2022:

I am one of the victims ( list of victims - https://blog.mollywhite.net/celsius-letters/ ) who put my retirement funds into Celsius. I have 6 figures in Celsius.

Doc 548, filed August 18, 2022:

I am writing to convey my utter disgust at Alex Mashinsky of Celcius Network. I trusted Celcius as a legitimate bank to hold and invest my crypto. I don’t have that much money, and I put it all in Celcius. The total money I have is USD 10,428.52 coins. I understand that the value of the market and company shares can fluctuate. I want Celcius Network to return my money; they can take the reward they had given me

I understand that I am considered a small investment I gained from working as a regular employee and invested for my son to get to elementary school. The funds I put by trusting Celcius have left me in a position of hardship.

Doc 535, filed August 18, 2022:

I , like many thousands of others it would appear, took [Alex Mashinksy] at his word and unfortunately did not dig into the small print to see what we were actually signing up to. This unfortunately is normal with a retail business with very few, if any, people reading terms of service etc because lending has been around for a long time and you just imagine that all agreements where you post collateral against a loan are standard in nature and you assume you keep title to your assets until the loan is either paid off or you default or get liquidated.

Doc 531, filed August 17, 2022:

As a retail user with two current active loans, I am truly sickened by what has happened. What I thought was the safest outcome has become the biggest financial risk and loss in my life.

Doc 530, filed August 17, 2022:

As we approached the recent bear market I thought this was a safe place to HODL my assets. Shortly before the freeze I decided I wanted completely out of Celsius and started to move my assets into the custody wallet and started to update my wallet addresses so I can deposit my funds to my Exodus wallet for safe keeping. Unfortunately, for me I was a day late and the freeze occurred while I was changing my addresses and so now the majority of my funds are in Custody. The remaining is locked up in a $30,000 loan that I can fulfill, if I can receive my collateral back of 6.18 BTC [~$147,800 on date of filing].

Doc 529, filed July 22, 2022:

I would like to take a moment of your time; I had a personal injury settlement and was in contact with Celsius 7 times prior to me depositing my personal injury funds into their company and purchasing crypto coins. I was assured that Celsius was not only completely safe to hold and purchase coins, they would help produce high interest returns so my family would be able to maintain my health needs. I have been left paralyzed on my right side and my wife has the full-time job of taking care of my personal needs after my accident.

At the time Celsius froze all accounts we only had a few thousand dollars that was not invested with Celsius. We are now in jeopardy of losing our home and everything we own not to mention having money for basic living, food, utilities, and medical care.

Doc 512, filed August 17, 2022:

I am retired and have 50,000 USDC in my Celsius account to help fund my retirement, I rely on these holdings for my daily expenses. I researched USDC before making this decision and it appeared to be a safe way to hold my cash and earn some interest. Even now, this is what you find when you Google “USDC”, note the word “always”.

“Known as a fully-reserved stablecoin, every digital dollar of USDC on the internet is 100% backed by cash and short-dated U.S. treasuries, so that it’s always redeemable 1:1 for U.S. dollars. USDC reserves are held in the custody and management of leading U.S. financial institutions, including BlackRock and BNY Mellon.” …

I do not understand how Celsius USDC can just disappear given safety measures built into USDC by Centre, unless Celsius falsified information.

Doc 504, filed August 15, 2022:

I have over $80,000 (current value) worth of assets on the Celsius platform which I have accumulated over 5 years. These same assets were worth over $150,000 at one point and I believe in the future of crypto assets and expect the value will be even higher. Like everyone I’m just trying to secure my families future as best I can and losing these assets would be devastating. I am not asking for anything more than the return of the assets I have on the platform. I can deal with the value of my assets declining, even to zero, but being defrauded is a different and difficult pill to swallow.

Doc 503, filed August 16, 2022:

I appreciate your attention and that you put your efforts in this case. My letter is brief; just to say that I opened my account and deposited in Celsius only 3 weeks before the withdrawal freeze! I decided to put all my savings of years! …

In those 3 weeks I made $56 before my life savings were frozen. God gave him this challenge to defend ourselves, we are families, we are hard-working and honest people. We don’t deserve to lose everything. I thank you for your time and your reflection in the face of so much pain caused.

Doc 502, filed August 16, 2022:

As of August 16, 2022, 11:15am ET I have a portfolio balance worth roughly $43,000, all of which is frozen within my Celsius earn account.

Like hundreds of other account holders, I am here to express my outrage with Celsius’ deliberate manipulation throughout their messaging on their website, app, marketing campaigns and emails. …

I am lucky that I have other cash and assets to keep me afloat; my life is not by any means ruined. If anything, my financial goals are just delayed. However, it is still difficult to accept this loss and remain optimistic. I sympathize with the hundreds of thousands of other account holders who also have a significant portion of their savings frozen, potentially never to be seen again beyond a nonbusiness bad debt tax right off.

Doc 501, filed August 16, 2022:

I’m a Celsius Lending customer who took out a 4x overcollateralized loan in December, 2021. While I accepted the risk that the value of my collateral might fall, I did not accept the risk that Celsius, through their own actions, might lose my collateral. Now because of their mismanagement we must figure out how to allocate the losses that Celsius incurred.

Doc 496, filed July 26, 2022:

Like many others, I invested my hard earned money with Celsius. My account included the following shares:

Bitcoin (BTC) 1.004657 shares [~$21,200 on date of filing]

USD Coin (USDC) 5,504.421861 shares

Ethereum (ETH) 1.005219 shares [~$1,400 on date of filing]

I am a very conservative investor and looked long and hard at the options that were available in the marketplace. After researching for two years and spending many hours of watching videos, reading many different business articles about Celsius and Alex Mashinsky, I finally made the decision to invest in Celsius.

It appeared to be a safe investment with a reasonable return. As you can see by investing in USDC, I was still taking the conservative route with some of the investment. As the market declined, I still felt my investment was safe from the reassurances of Mr. Mashinsky.

I am 63 years and approaching retirement. As with many people getting close to retirement, we look for the best return for our money. This investment may not appear to be much, but without my funds back I will have to delay my retirement.

Doc 494, filed July 27, 2022:

I am a Celsius depositor that only use the Earn account to earn interest using the super safe USD coins. I didn’t participate in any other Celsius program I deemed riskier than a simple savings program. I’m just one of the thousands of Celsius depositors who had their hopes to grow their nest egg in a safe place. But the reality is shattered hopes, broken hearts, and nightmares due to miss management, deceit and lies from Celsius and their leadership team.

My personal story is I became a proud US citizen about two years ago. I was full of hope to fulfil my American dream and one important aspect of that dream is financial freedom. Transferring my hard-earned money to Celsius and earn stable interest was one important step I thought to achieve that. I thought I had done enough research about the company and the program, and it should be a safe bet since I didn’t participate in any other riskier programs. But Celsius bankruptcy filing is a huge blow and a rude awakening to my American dream. It has now put me in a financially difficult position. My confidence in US financial system is deeply weakened. I even started doubting why I have spent so many efforts to become a US citizen and is treated like that?

Please do you best to help us small regular folks get what is ours back, my current account position is valued at $86,995.

Doc 493, filed July 28, 2022:

I realized that Celsius may lend the coins out, but was assured that they have enough collateral in kind to cover any defaults. The way they described nothing short of a nuclear attack would jeopardize the assets. And I have not heard that anyone defaulted. So what happened to all the money?

I still don’t understand exactly what happened. How could Celsius just take our monies? And if they loaned it to someone, don’t those people still owe the money? Why can’t they collect the loans and put the money back into our wallets?

Are they still paying the 100’s of employees they have?

I saw something about them wanting to pay their vendors? That doesn’t make sense. Any money coming in should go to restoring the customer wallets.

Doc 490, filed July 28, 2022:

I am a depositor in Celsius Network, have around $30,000 (by current market price) locked at Celsius Network earn program.

Here is my story which I thought might be interesting for the court who are the Celsius depositors.

It is going back to 2019 when I saw the Celsius and Mr.Mashinsky annonces. That time I had around $2,000 of my savings money which I transferred to Celsius Network.

The worst part of my story is here that I asked my father to give his pension saving money to me to put in Celsius. They could get enough value per week to spend their life in a poor country. My father was a factory hard worker and he got burned twice at work in his face and foot and now after the second surgery he is hardly walking.

Of course he does not know about what has happened to his life saving money yet and today I am still working harder to pay them.

Doc 489, filed July 28, 2022:

Hello, im taking a moment to write how I feel about this Celsius incident. I am one of many that have been lied to and got convinced that it was safe parking funds at Celsius. I have had some really tough years in life but now I feel like I have been pushed to the edge. It took a long time for me to save the money I deposited, it means the world to me. Fortunately, I have a job so I will survive but the problem is im so depressed I feel like giving up. My dream is to be a daytrader and I just need all of my HARD earned money to be able to keep pursue this dream of mine and quit my very destructive job. Its just not going to work otherwise.

Are the world really this cruel? Can a person get away ruining so many lives? The amount of suffering this is going to cause if we don’t get our money back is insane. EVERYTHING needs to get back, no bullshit compensation. Alex has to repair this, I don’t care how long it takes. He is just a total psychopath who lacks empathy if he doesn’t work his ass off until the day 100% is payed back. I believe this is on the level of mass murder, I am disgusted!

Doc 488, filed August 15, 2022:

I am writing to you in response to the Chapter 11 Bankruptcy proceedings of Celsius Network. I have been a customer with them since mid 2020. I deposited my Bitcoin and other alt-coins in an account to earn rewards. I decided to deposit with Celsius over other exchanges and lenders because of the CEO, Alex Mashinky’s, vision for his company. He made a lot of compelling points. He made people to believe that Celsius was a safe and viable alternative to a bank with way better interest. The illusion of safety, is what really compelled me to deposit my crypto assets. I thought to myself after watching a few of his AMA’s and videos on YouTube, “What a great guy that really wants to help people safely earn rewards on their crypto currency.” “He is giving that power back to the people to empower themselves to make their own intelligent financial decisions.” ….

I am not a rich person and have about $2,000 worth of Bitcoin, as of todays values. I thought this Bitcoin was safe and accessible. I didn’t realize how the customers funds were being used. I feel lied to and manipulated into believing that Alex had the best interests of his customers in mind by making safe and reasonable decisions with his customers funds.

Doc 487, filed August 1, 2022:

My wife and I have 150k of our savings in Celsius. We are both retired middle class people who thought this was a safe investment based on everything Machinsky represented in his AMA ‘s.

Doc 486, filed August 1, 2022:

I exactly have 0.703176 BTC [~$16,400 on date of filing] held on a Custody wallet so I deeply hope Justice is served and these assets returned to their owners. This situation has caused me a lot of stress, anxiety and embarrassment.

Doc 485, filed August 1, 2022:

This horrible event has truly damaged my life. I can hardly sleep, I’m struggled to pay my bills, and I can’t live a normal life anymore. The anxiety, stress, depression and general sadness has been unreal. I have two young kids who I was trying building up money for. I am having borrow money from friends and sell remaining assets to survive. I could go to into such more detail, but I am sure you get the idea.

Doc 484, filed August 8, 2022:

I am a United States Air Force military member with 22 years of service. I, like many other members, deposited my life and retirement savings into Celsius. I am a conservative investor and for the most part, I was saving my cryptocurrency at home. This was until I was introduced to Celsius and Mr. Alex Mashinsky. I felt reassured that my funds were safe with Celsius. …

I am a long-term holder and investor, not a trader. For this reason, I was not surprised or concerned when Celsius froze all the accounts. I understand the volatility of the crypto market. Unfortunately, the company stop communicating with the stakeholders and started contracting lawyers while keeping the public in the dark. Soon after, information got out about the risky Celsius investment skims and Ponzi like operations.

Doc 481, filed August 5, 2022:

As a Celsius account holder with an initial principal balance of approximately $400,000 , a substantial portion of my family’s life savings, I would like to share my thoughts on the Celsius bankruptcy situation …

It had taken me many years to be convinced enough to move a sizable portion of my family’s savings from mutual funds into crypto. I purchased cryptocurrencies because I was made aware of Celsius Network, where I would have the opportunity to bank my cryptocurrencies somewhere that I could earn weekly interest, credited to my account in-kind, while holding for the long term. After tracking the broad landscape of the crypto world, the institutional investment in it, the tens of billions of dollars Celsius had under management, and the so-called transparency about safety and reserves communicated at every step of the way in Alex Maskinsky’s AMA’s and in Celsius’ correspondence, I finally did it and I was excited to have pulled the trigger.

Doc 480, filed August 4, 2022:

Thank you for taking the time to read the letters of those who trusted Celsius and invested a significant amount of our life savings, our children’s tuition, along with part of our retirement funds into this company. My heart sank when I found out that Celsius filed for bankruptcy and had halted all withdrawals. I am not allowed to access my family’s funds because of reckless decisions made by the leadership at Celsius who is still allowed to pay their employees 100% of their salaries and are even trying to be sure their executives get their bonuses. Their message to the stakeholders is their families matter more than we do and share no liability in this process which is not an amicable solution. Why is that allowed? Because they have a lifestyle to maintain? We all have life commitments and family members to take care of so I am asking the court to proceed without prejudice and ensure that the liability is shared with the leadership team including those with decision making authority at Celsius. I have 11,401.95 in Celsius and my wife has 332.46 and to some it may not seem like much but to us it was a large portion of our family savings allocated to certain financial buckets as stated above. In addition, I needed to access the funds for an emergency and was unable to do so which caused a hardship for my family. This is completely unfair.

Doc 478, filed August 16, 2022:

Outstanding loans currently held (locked) with Celsius;

$16,000 due on Jul 04 2022 / Collateral locked = 1.368955 BTC (25% LTV @ 1%) [~$33,100 on date of filing]

$3,660 due on Mar 25 2023 / Collateral locked = 0.332033 BTC (25% LTV @ 1%) [~$8,000]

$2,000 due on Feb 02 2023 / Collateral locked = 0.208148 BTC (25% LTV @ 1%) [~$5,000]

$23,000 due on Jan 10 2023 / Collateral locked = 2.168430 BTC (25% LTV @ 1%) [~$52,400]

$10,000 due on Nov 29 2023 / Collateral locked = 0.703829 BTC (25% LTV @ 1%) [~$17,000]

$8,300 due on Nov 26 2023 / Collateral locked = 22.648765 ETH (25% LTV @ 1%) [~$43,200 on date of filing]

Forced Liquidations due to Celsius freezing accounts;

$26,000 liquidated on Jun 18 2022 / Collateral liquidated = 1.41833729 BTC [~$34,300]

$10,000 liquidated on Jun 18 2022 / Collateral liquidated = 0.54191471 BTC [~$13,100]

$15,000 liquidated on Jun 18 2022 / Collateral liquidated = 16.49602078 ETH [~$31,500]

$12,000 liquidated on Jun 13 2022 / Collateral liquidated = 9.33107542 ETH [~$17,800]

Due to the freezing of Celsius accounts on June 12th 2022, the above liquidations were forced upon me as I could not swap, transfer, pay-off or add collateral to protect the loans from liquidation during the market downturn. I had the capital to pay off these loans to release the collateral back into my Earn account, but this was not possible due to the freeze. Outside of the loan collateral I currently have in my Earn account wallet the following remaining assets;

Bitcoin BTC = 0.412386 [~$10,000]

Ethereum ETH = 3.106619 [~$5,900]

Tether USDT = $2,496.94

Sir, I want to honor my obligation of paying back the principal and interest on my loans so that I may receive my collateral back. However, it makes no financial sense to send money to a bankrupt company when it is unknown what will happen to this collateral as it is now part of the Chapter 11 process.

Doc 476, filed August 15, 2022:

I hold a loan with Celsius. At the time that I took out my loan, I posted $2000 worth of a cryptocurrency called Solana to receive a $500 loan. To many, this is a meager sum of money, but to me it was the bulk of what I had been able to save and invest at this point. I took out this small loan as I had been led to believe by Celsius that my hard earned collateral was safe with them. ….

I am not a wealthy person or a mega corporation. My 62 plus Solana are now worth almost $2700 at the current price as I write this. For some, this is a drop in the bucket, for me this is everything.

At the end of the day, I just want Celsius to abide by the deal we made and for both of us to be made whole. Celsius with their $500, and me with my Solana. As we agreed to do.

Doc 461, filed August 15, 2022:

I live in Switzerland and I have most of my money in digital Assets ( Stablecoins and BTC).

I have used Celsius services because it has been told me they were 100% transparent solvent and always available to withdraw.

I am facing a very stressful financial and emotional moment of my life, additionally I have advised Celsius services to my friends and family who consider myself a complete idiot and are facing losses as well.

Doc 458, filed August 15, 2022:

My loan from Celsius was for $52,023. My 4x collateral is currently valued at $188,100 (99 ETH) and was over $250,000 when I initially took out the loan. A day before Celsius halted withdrawals (Saturday June 11) I increased my collateral by $47,600 (34 ETH) to protect any liquidation risk and with the assumption I was dealing with an organization that was practicing an acceptable level of risk management when handling retail funds/loans. This increase in collateral could have been used to pay off the loan a long time ago if I was aware of the mismanagement of funds taking place at Celsius. This is the majority of my life savings, the impact of losing this money would have a profound negative impact to my life and the life of my two kids and partner. With rising living cost and inflation, and no access to these funds, we are already facing hardship.

Doc 439, filed August 12, 2022:

I am a retired American citizen, living in Thailand. I invested three generations family wealth in my life savings with Celsius. Unfortunately, Celsius filed for bankruptcy.

I would like to have my assets returned to me. I turn 70 years old at the end of July 2022. I do not know about lawyers. I could not afford them in this present situation.

Could you please award me my assets and have them returned to me?

Why do I ask for my assets, rather than a dollar value? The reason is: I bought some Bitcoin at around $58,800 per Bitcoin. It went up to $69,000 per Bitcoin. Bitcoin is now around $20,000 per coin. I would rather have my Bitcoins, instead of the present cash value, as I believe the value will appreciate again, once the Bear Market is over and a Bull Market begins again.

Doc 435, filed August 11, 2022:

The lives of 1.8 million people are facing a financial crisis that never should have existed.

The issues we are up against remind many of a “modern Enron” via misrepresented communications and mismanaged regulatory compliance of a financial company, Celsius. …

My creditor stake in Celsius is valued at nearly $110,000. As a professional in digital ledger technology and innovation that drives economic advancement in major companies, I can assure you that the technology that Celsius represents is not what led to its destruction.

Doc 434, filed August 10, 2022:

I have 22.43053 Bitcoin [~$520,000 on date of filing] and 171.934290 Ether [~$292,000 on date of filing] frozen in Celsius in there earn account.

I think that Celsius should be sold or liquidated. They clearly mismanaged my funds with poor risk management and poor selection of investments. At the very least the management should be replaced.

Doc 422, filed August 10, 2022:

I’m 29 y/o from France. Several years ago, I launched my online business and coaching activity, I had been dreaming about it for several years and had to fight against my parents who were reluctant. I worked hard, more than 10 hours a day during these years to prove to them that I could do it. It paid off and I decided to invest my hard earned money to strengthen my financial independence. I’m thrifty and not a big spender

Last year, I deposited $81,000 in Celsius because all indications were that it was safe and I wanted to start generating income on those savings, rather than buying an apartment or letting that money “sleep” in the bank.

Doc 419, filed August 9, 2022:

I am a 69-year-old Blind retired physician who has put cash I would ordinarily keep in a bank into this platform. They indicated the safety and conservativeness with which they proposed to do business including loans, etc.

I had been a customer of Blockfi and transferred all my holdings to Celsius which turned out to be a very bad decision. They had indicated in some of their calls that Blockfi was in trouble and that they paid higher interest rates on crypto. If I had left my savings on Blockfi I would be in a better position today. Not only that but I also paid income tax on the “Interest” that I “earned” on the platform.

Doc 407, filed August 9, 2022:

The platform has $ 7000 owned by me and I hope you understand. About a year ago, I transferred around $ 7000 USD (most of my savings) in the form of: 0.082224 BTC Bitcoin [~$1,950 on date of filing] (in the “Earn” account) 0.818848 ETH Ethereum [~$1,450 on date of filing] (in the “Earn” account) This is money that I honestly earned by making a lot of sacrifices. The crisis has brought me to my knees! I can’t believe I was foolish enough to believe CEO Alex Mashinsky’s words promising the Celsius Network LLC platform would replace the banks! He set up a great disinformation campaign, everyone believed in the solidity of the project. The bear market has revealed the cards, has revealed the reality. It was all a gamble, they played with our money!

Doc 405, filed August 9, 2022:

My name is Brandon Lawrence. I am writing the letter for the same reason as many, I am one of the little guys. I put my life savings and trust into Celsius and co. Even worse, I took out a margin loan on Robinhood for $50,000 for a Bitcoin at near it’s high, then I sent it to Celsius to offset the monthly margin interest. I also sent a Bitcoin from when I was buying a little bit here and there around 2018 and up. It was my nest egg. Now when I go to work, I drink water and eat any scraps I can find for lunch. Everyday I am still paying for the bitcoin I do not have, with interest. I am in deep depression and do not know if I can pull myself out of this.

Doc 403, filed August 9, 2022:

Both my wife and I are depositors in Celsius and have three young boys ages 11, 17, and 20. We are unaccredited USA investors that were lured into Celsius based on promises, directly from the CEO, that our deposits are safe and can be withdrawn at any time. The CEO of Celsius stated several times that Celsius is better and safer than a bank, and those sentiments are reflected in their advertising.

Doc 397, filed August 8, 2022:

During my life, I have escaped domestic abuses perpetrated within a 28 year marriage; Raised an orphan as an older adult without any support. I have survived a brain tumor, while coping with polycystic kidney disease, debilitating arthritis, and extreme fibromyalgia.

During the years of raising my son a a single mother, I scrimped and saved for a meager retirement. Regretfully I placed 70% of my funds in the “Earn Account” in Celsius Network. …

Now, as a single senior citizen I face kidney dialysis. Additionally, I will be forced to sell my home, return to work and possibly rely on government relief to make up for this deception.

Doc 388, filed August 6, 2022:

About a year ago, I transferred around $30,000USD (most of my savings)…

In 2021, I paid taxes on all my 1046 $USD earnings in the form of 1099-MISC. Not only am I not able to access any of these investments I once considered safe, but I was taxed on earnings that I may never see, in addition to potentially never seeing my savings again.

Doc 387, filed August 6, 2022:

I am one of the depositors in Celsius I have my life-saving funds currently locked in the platform. I am still feeling confused, having mental trauma and the current Celsius debacle has gotten myself into a financial constraint that somewhat changed and restricted my usual day to day life. With that, I am seeking help urgently from you, as I am feeling helpless at the moment.

Doc 386, filed August 7, 2022:

As I sit here behind my computer, I am almost at a loss for words due to the gross misrepresentation by Celsius Network LLC. In the past 6 weeks, the unexpected freeze of my accounts and subsequent filing of bankruptcy has disrupted both my and my family’s life. The stress of this event on both myself, and my family is beyond words. I don’t know how to express the guilt, the frustration, the shame, the self-doubt, and absolute anger that I am feeling regarding the burden I have caused and placed on my family

This is the 1st day in a week that I’ve been able to be in my home and sit in front of my computer to type out this letter. Because of the anxiety I am feeling over this event, I have become depressed, moody and have even been drinking in an attempt to decrease my stress. Last week my wife of 17 years asked me to leave our home due to my emotional turmoil and unpredictability. I have missed work this past week as I have sought out help for behavioral counseling and marital counseling as my wife essentially left me last week over a depressive episode due to this. How do I explain to my daughters that the financial nest egg that would have been their start to a better future is now “frozen”, and we may never see those assets again. How do I possibly rebuild that nest egg now? Most importantly, how do I begin the healing process with my wife and my daughters over this?

Doc 383, filed August 6, 2022:

I made the decision to move my entire cryptocurrency portfolio, which at the time of writing this is over 80% of my life savings, to the Celsius platform on June 11th - just 24 hours before it was revealed that withdrawals were paused and all accounts were frozen. The total monetary investment is in excess of $80,000. It is mostly invested in Bitcoin, some Ethereum and over $6000 in USDC stablecoin.

My funds are in a “custody account”, which from what I understand should remain in my control, but unfortunately this is not the case. I never earned a single cent from Celsius, never used their earn program and it’s a bitter pill to swallow that the freeze was announced as soon as I trustfully moved my assets there.

Over the 10 years I have lived in the United States, I have worked very hard for my money at the United States Postal Service as a mail carrier. I have saved my money diligently with the hope of one day buying a house, and my recent investments were part of a plan to help achieve that. I don’t wish to be rich, just to build a comfortable future for my loved ones and I.

Doc 366, filed August 4, 2022:

I deposited money on the Celsius platform as a retail investor who sought an opportunity for a safe, conservative investment. I am an “average Joe” of average means, I work full time as a registered nurse and I am raising a newborn daughter. I am not a rich man, I work hard, I serve my community and I abide by the law.

Over the course of about one year, I purchased about $10,0000 worth of bitcoin and deposited it into Celsius for long term storage as these funds are dedicated to a down payment for a house and meeting the needs of my daughter.

Doc 356, filed August 4, 2022:

As a Celsius account holder with an initial principal balance of approximately $125,000 (of which I have withdrawn/transferred out $0 since my initial transfer into Celsius), a substantial portion of my life’s savings… It had taken me many years to be convinced enough to move a sizeable portion of my family’s savings from mutual funds into crypto. I purchased cryptocurrencies because I was made aware of Celsius Network, where I would have the opportunity to bank my cryptocurrencies somewhere that I could earn weekly interest, credited to my account in-kind, while holding for the long term… It was November 29, 2021 when I first started buying BTC, ETH, LINK, MATIC, and SNX and transferring it all into my Celsius account. I quickly got to a point where my family and I were satisfied by the amount of money we had parked in Celsius, and our plan was to let it ride for the next 5-10 years. We thought our investment was protected, but little did we know this was a Ponzi scheme all along – an investment fraud that pays new investors with funds collected from new investors. I believe Celsius qualifies, because as the markets crashed and people stopped putting money in, and rather started to panic and take their money out, the company went defunct. However, this still baffles me, because my ~$125,000 of investment that I thought Celsius was a safe haven for, became locked out. One would think if a BTC was worth 50K, and it went to 25K, you could technically access your BTC at the 25K if you needed to. This is not the case, and is heart breaking.

Doc 353, filed August 1, 2022:

Today, August 1, I have no access to my Crypto funds (20.156131 ETH [~$34,000 on date of filing], that were worth 71.888,66 USD at the time I deposited them on October 7, 2021). This situation seems unfair to me, because that is my money, my life savings. I trusted them. I´m from Argentina, a third world country where the US Dollar worth a lot of money to us (a Dollar is worth almost 300 Pesos). I decided to protect myself from the inflation of my country by having my savings in crypto and I trusted Celsius by depositing my money with them to obtain a small profit that would allow me to live at the exchange rate of the US dollar. Now I have nothing. I quit my job, to live off the rewards from Celsius, just like Alex Mashinsky encouraged us to do at the AMA’s on YouTube… Now, I can’t access my money due to this mishandling by Celsius, I am full of debts and can’t pay my rent. I’m desperate and I feel like I’m living a nightmare. I really hope all this ends soon and be able to have access to my money to continue living.

Doc 347, filed August 4, 2022:

I do have to admit, the higher-than-normal interest payout for stablecoins is what attracted me to Celsius. Currently, I have deposited $19,596.14 USDC statblecoins, over the past 12 months. This money (USDC) was to be withdrawn yearly to pay my house property taxes, house insurance, and family living expenses. My point is, I did not invest in something risky, since I knew I needed this money monthly/yearly.

Doc 345, filed August 3, 2022:

I started working on my first job with my father when I was 14 years old, and I have not stopped working ever since. I am also used to keeping money in my monthly savings account. When I was a teenager, I learnt more about investments and got into the investing world. I became an investor in the stock market and I multiplied my assets in a conscious and planned way. In 2020, I decided to start researching the cryptocurrency market, and I have embarked on this journey since then.

I invested all my capital accumulated in these years due to honest work as a simple salesman with an income of roughly $234.30/month. I converted all my assets into cryptocurrencies (stocks, my apartment and a car). Therefore, I decided, in 2021, after searching about Celsius, to use half of it to apply for the loan program and the other half to keep aside to pay off the loans at some point in the future, always acting in good faith when in business with an entity or a person. I have always paid off my debts.

Today, I come to Your Excellency asking you to consider my situation. I know the amount in my account may not seem like much to many in the US, but it means a lot to people from developing countries, like me, and losing that amount would have an immeasurable impact on my current life and my future. Seeing the money I saved as a 14-year-old boy lost like this out of the blue is heartbreaking.

Doc 341, filed August 3, 2022:

I have been trying my best to write to you for the past two weeks, but I am just so depressed that it has been a real chore. The fact that past 11 years of saving my money, then rolling it into Bitcoin 2020 that was stored in what I thought was a relatively ‘safe’ bet has now been greatly compromised. I have sweated, bled, cried, and worked 50+ hours weeks for 10 + years, not to mention out of those 7 and half years I went to school full time and worked full time and was going to use this as my nest egg to pay my student loans which payment begins assuming in January 2023. To be here now only feels that I have been deceived, taken advantage of, and held hostage for what I thought this entire time was MINE. … This is supposed to be some of the happiest moments of my life where I just graduated college with an awesome engineering degree, moved to a new exotic big city, earned a dream career in a top fortune 100 company and someone is just trying to walk away legally with my assets that I worked so hard and their defense is its in the terms of agreement and its social medias fault?????? NO! I don’t walk 40%, 50%, 60%, 70%, 80%, 90%, 95%, I want all Back because it is MINE!!!! If anything, I should be suing for emotional damages!! I won’t and don’t believe in that sort of thing though. I just want what is MINE! I can wait because I never planned on selling it. It is intended for generations of [writer’s surname]’s down the line, and this is not just money. Its Bitcoin!!! Anyways I digress other people have been doing a great job of expressing of how I am feeling because the shame, the anger, deep sadness, the humiliation, irresponsibility (I convinced a friend to put roughly a 3rd of a bitcoin in to Celsius too) anxiety I feel is immense, and while I am managing my mental health with resources from my new job, it is still extreme distracting, and I know the courts will determine what is just and what isn’t.

Doc 333, filed July 28, 2022:

I’m a Celsius depositor at risk of losing much of my life savings that is locked on Celsius. I’m a 72-year-old woman who supports myself with parttime work and social security. It took me four years of buying BTC and ETH in small increments to accrue the 1 Bitcoin [~$23,000 on date of filing], 7 ETH [~$11,500 on date of filing] that are now locked in Celsius. I planned to hold these assets in a safe crypto ‘bank’ and wait for them to increase in value so I could pay off my mortgage. Only without a mortgage payment will I be able to exist on just social security. I’m now facing the loss of my savings and a future of mortgage payments I can’t pay due to Celsius’ fraud against depositors.

Doc 329, filed July 29, 2022:

I have been retired for over a decade and my wife and I have invested approximately one half of our life savings in the Celsius Network Rewards Account. Upon learning of the Creditors Committee, I considered applying but learned that this committee would be most likely made up of creditors with significant assets invested. While this looks to be the case, I wish to point out that on a percentage of total wealth basis few would exceed our loss.

Doc 321, filed July 26, 2022:

I also share a similar story to many other depositors who have modest amounts of their net worth locked in Celsius. I am just a little retired old lady living on a fixed income with some investments but am no way rich or even well-off. I also know that many people are speculators, not someone like myself who is searching for ways to supplement Social Security income, especially during a high inflationary environment.

I purchased my small amount of crypto hoping just to earn enough to help me weather a few years, kind of a safety net. It’s not a lot of money and I never expected it to be, but I didn’t think it would disappear, especially with a company that was touted as “safe.”

Doc 318, filed July 28, 2022:

I’m reaching out to you as a Secured Creditor in Celsius who has been a VIP client of Celsius since September 2021.

Before joining Celsius, I did tremendous research and talked with Celsius customer service, who promised me that my funds were safe because I controlled the keys to my wallet. I trusted the company and I decided to pour all of my life savings with the company, lending them $632,329.03. …

I must also say that the whole time I was a customer, I was solicited by Taylor Hendrickson, Celsius Corporate & VIP Account Manager, who begged me to become an accredited investor, since I owned significant amounts of bitcoins and other assets. He warned me saying that if I do not become an accredited investor, I would not be able to collect any more interest because New Jersey gave Celsius a cease & desist order to stop them from fraudulently enticing more customers with the promise of high interest bearing account, which Mashinsky claimed was safer than a bank. …

I have absolutely no money left in my bank account now, and if I do not get my money back, I will be out in the streets with nothing to show for it. I plead with you, please help the individual clients of Celsius first, ahead of corporate clients. We will lose the roof over our head if we do not get our money back.

Doc 317, filed July 25, 2022:

Judge Glenn, I have sadly read letter after letter from disappointed to desperate account holders whose money has been frozen at best, and lost at worst by Celsius management. It breaks my heart to read these letters pleading for some kind of justice for the “little people”. I consider myself one of these little people, not special or connected. I’m 71 years old, retired, and have money in the low six figures tied up in Celsius. Since I’m retired, I’ll never have an opportunity to replace those funds. I don’t know if I’ll ever get any of my deposits back, but I am lucky in that regard. I won’t starve and will still have a place to live. The money, foolishly, was for my heirs. I can’t bring myself to let them know that I have lost their money, eventhough they didn’t know it was housed in Celsius. In the end, I can only blame myself.

Doc 314, filed August 1, 2022:

It is really hard to write this letter as I lost my life savings that I’ve worked for more than 20 years. I am one of the people who actually did research and spend a lot of hours learning about Celcius before putting life savings there. I actively follow their reports, in fact, a few days before they paused the funds, they (Alex Mashinsky) still gave us assurance that our funds were totally safe.

Doc 312, filed August 1, 2022:

As background, I am a medical professional working to support Oncology research, so I am not an expert on cryptocurrency or bankruptcy legal expert. I am one of the creditors with well over six figures of my savings invested on this platform. I’ve been oscillating between angry and depressed with this experience over the last two months with no access to my assets. I will not rest until depositors are made whole without a so called “haircut” on our funds deposited. Just like most people during this financial crisis created primarily by our government and financial governing bodies, I was trying to gain a little income to offset inflation caused by the Federal Reserve pushing rates to zero, buying up of all U.S debt/bonds, and the government flooding the market with a ridiculous excess of money supply and liquidity. Holding USD or cash in traditional banks with zero percent interest meant you were making no interest and losing significant buying power relative to the parabolic, historic inflation rate. Aside from the stable coin USDC, I only invested in the largest and safest crypto investments while primarily earning a modest rate of return with Celsius right now of 2.5% BTC and 4% ETH. Celsius and Alex Mashinsky fraudulently mislead depositors on their risk model or I would have never invested on this platform.

Doc 311, filed July 29, 2022:

I have a significant amount of digital assets in the borrow/loans part of Celsius network that has been frozen over the past month. In total I have 7 loans adding up to almost 50 bitcoin [~$1.18 million on date of filing] and 160 eth [~$252,000 on date of filing].

Doc 310, filed August 1, 2022:

My sister… introduced me to deposit my coins in Cesius. She is very cautious for what she is doing all the time but I can’t believe this issue for her and myself even for my mother…

Doc 309, filed July 29, 2022:

Sadly my mother passed away recently and on 8 March 2022, with my father having passed away in 2018, I deposited $143,200 of inheritance in Bitcoin with Celsius. This represented the majority of my parents’ lives of hard work. With these funds I obtained a loan with Celsius, receiving $35,767 USD for the above collateral.

Doc 307, filed July 29, 2022:

Your honor this case has impacted the lives of potentially tens of thousands around the world, including my life savings as a retired school teacher… I too feel misled and have suffered significant financial harm that will impair the way I live for the rest of my living years.

Doc 306, filed July 29, 2022:

I am a 22 years old psychology student from Romania, Europe who worked hard to save some money - with the idea: save now, so you will not have to work for the rest of your life. I studied, I worked 2 jobs and I managed to save 0.036285 BTC (822$ on date of filing). I took no loans and I planned to withdraw my money after 5 years, to buy a house. I feel betrayed, lied & scammed by Alex Mashinsky and the company. They assured us every week that everything is fine & they showed us false data.

Doc 290, filed July 27, 2022:

I consider myself a fiscal conservative investor and would not risk and avoid speculation. Since the 2008 financial crisis, I had become cautious of the financial markets and that led me to exploring alternatives. This is when I came across Bitcoin and started to research.

Gradually, after becoming a trusted follower of Mr. Mashinsky and Celsius Network, I decided to move a substantial part of my investment/retirement into Celsius.

Doc 283, filed July 27, 2022:

Having lost money in Terra Luna collapse earlier and looking at my crypto holdings decreasing in value because of the bear market, I was convinced by Alex Mashinsky that depositing my remaining crypto to Celsius makes sense as this way they can generate interests and hopefully offset some of my losses. When I deposited my remaining crypto to Celsius, 2 days later, Alex Mashinsky paused all withdrawals.

The funds I deposited to Celsius are hard earned money. I worked long hours for those money and saved for many years. They represent my life’s savings and part of my retirement plan.

Doc 279, filed July 28, 2022:

I am a retired Dutch citizen.

Like many others i never thought of transferring all my pension savings as an investment (as Celsius seems to be calling it suddenly after filing for Chapter 11) but from one savings account to another… Also most of us — elderly; risk avoiding depositers — deposited in stable coins because at our age, one can’t speculate on highly volatile assets such as crypto currencies. Many of us — as we are not able to access our savings — can’t now pay for medium or bigger ‘calamities’ in our households, unless that is why we did set aside our savings for.

Doc 278, filed July 28, 2022:

I am a Celsius customer with around $30, 000 USD of deposits locked up in the platform.

I have a large chunk of my retirement funds in this organization and will be severely affected by any loss.

Doc 273, filed July 27, 2022:

I personally know dozens of individuals who have been tremendously affected by what has unfolded at Celsius over the last 6 weeks, including my entire immediate family.

Once I transferred my entire portfolio to Celsius (approximately 47 BTC), I began taking 1% interest loans on a portion of my BTC. Within days of being on their platform, my entire account was frozen (over a $1,000,000 in assets). I didn’t even have the opportunity to withdraw the loan I took from Celsius even though I gave them 4x in collateral.

As it stands, I have lost my entire life savings on Celsius and am now in the process of selling my home.

Doc 272, filed July 26, 2022:

At the time of my deposit, it was worth approximately $100,000. Since the freeze of assets, my overall disposition has left me depressed most days. I am in my late 50s and making this money back is difficult at my age.

Doc 271, filed July 26, 2022:

In Celsius, I have not only my hard-earned savings. I have recommended it to other family members and now I am liable to bear the entire loss because I passed on those scammers’ promises.

Doc 267, filed July 27, 2022:

I’m 75 years old, a retired research scientist and have been investing for well over 50 years and investing in cryptocurrencies for over 6 years now.

I did not retire until 69 years old to have a sufficient nest egg for retirement and have invested a good portion of my total assets in cryptos. While I have done well with cryptos until Celsius’ bankruptcy, the loss of cryptos that are stored at Celsius would have a significant impact on my retirement, the proper care for my wife (who is ill and I am her caregiver), as well as my estate.

Doc 266, filed July 25, 2022:

I had been earning and holding this bitcoin for the last 6 years and it was my and my family’s everything all the savings we had for our future, I didn’t sell this bitcoin and took loans against it because I believed Celsius to hold on to them, but then they didn’t give me a possibility to add collateral or pay these loans back to get my collateral back to me, I could’ve sold it at 69k but didn’t and now Celsius just liquidated it illegally by not giving me a way to handle this.

Doc 262, filed July 24, 2022:

I am a 30% Disabled Veteran. I stand to lose about $38,000 worth of Crypto from this case. It is a significant amount of money to me!

I don’t know how much longer I’ll be able to work physically? I have several misalignments in my spine and many pinched nerves. You wouldn’t know it by looking at me and how I work. I generally don’t mention it, but it’s a reality for me. I’m trying to secure the future this company seemed to promise.

Doc 261, filed July 24, 2022:

In total I have deposited $3,000 into Celsius. I know that this may not sound like a large amount especially when hearing about the millions of dollars Celcius would like to continue to pay its employees. Losing this will have irreparable consequences on my well-being and will take me years to recover.

I am in need of withdrawing my funds immediately as I am in dire need of my funds during this time.

Doc 259, filed July 24, 2022:

I am one of the Celsius users that has been affected. Unfortunately I have all of my life savings held on the Celsius platform. My family trusted me to store their Bitcoin on my Celsius account as well. However, we did not expect to be blindsided. This was a lot of money that we were going to use as leverage for a better life - not having to live paycheck to paycheck, not having to worry about rent due, being able to pay off our debt and college tuition. It may not seem like a lot to the majority of people, but two years of our savings and investments have been robbed from us. For a low/middle class family, this whole situation is very daunting and extremely stressful.

Doc 258, filed July 22, 2022:

I am a disabled citizen who is dependent on government assistance. I feel it will help to shed light to the desperation I feel if I give you an idea of the extent of my disability. I broke my neck when I was 21 and this left me a quadriplegic, paralyzed from the neck down, and wheelchair bound. I recently turned 40. Aside from government assistance, I try my hardest to do my part and get work whenever and wherever I can. I am able to achieve this with the aid of my elderly mother who is unable to work herself.

As you can imagine, finances have always been tight so Crypto currency was my one hope of some sense of financial security . Since 2015 I bought what I could with the $8.00 hourly pay I was given as an event staff in hopes that maybe someday I can secure basic necessities for me and my family. I’m no “big fish”. The small fortune that Celcius has taken away from me was my life-savings that I have been building with sweat and sacrifice for 12 years and because of my situation this also includes sacrifices my mother has made. It is indeed small compared to other investors, but it carried with it my big hope for financial security.

I do not seek luxuries, Your Honor. 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. There have been many sleepless nights since Celsius halted withdrawals and this has made me really anxious about my future. 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. This financial blow by Celsius has caused me depressed and unable to work, my confidence is gone. I feel humiliated and defeated.

Doc 250, July 26, 2022:

I am a 40 year old father of 3 from Australia that had his life savings in a Celsius earn account and his entire superannuation stored in a SMSF Celsius account. On 29/03/22 both accounts came to a total of $561,901.79AUD (6.34BTC & 36.78 ETH)

This has had an immense impact on my life and my financial future looks extremely grim.

I feel humiliated, angry, anxious and have had many sleepless nights coming to the realisation the all my funds I have been saving for my childrens future for the past 20+ years has been gambled away by a liar and a fraud.

I would also like to add my father’s situation into this letter, he is a 65 year old retired man … who I convinced to invest his stake in Crypto currency into Celsius as a “safe haven”. Given my comfort level with Celsius, thanks to all the lies I was fed by Alex and the team listed above, he followed my advice and his crypto stake money was invested into Celsius. His current holdings are 14.926298 Ethereum, 1.032703 BTC, 6890.110949 USD and 54.959432 PolkaDot, which was worth on 29/03/22 $154,256.70AUD.

Doc 247, filed July 24, 2022:

I am a small investor from Spain, that put all his savings into crypto on Celsius, hoping they would grow slowly over the years and be safe. These savings were intended to help leverage the effort of sending three children to university and, if possible, our retirement. Now all these hopes and dreams are in danger.

Doc 243, filed July 22, 2022:

We are a common family trying to generate some extra income by taking risk as banks do not ay any interest, We deposited several Crypto currencies into Celcius Networj because they were advertising healvily and saying they are different. THey care for the small investors. They took our cyrpto coins and currencies and loaned out to people without proper collatrals against it.

Now we lost everything, we needed to pay our daughters studen loan, parents medical bills with the earnings from crypto but all is locked up in Celcius.

Doc 242, filed July 22, 2022:

The fact that Celsius is regulated by the state of New York and SEC compliant was a significant reason I decided to trust Alex and move my money on to this platform. I must ask what is the point of regulations if these regulations at the end of the day don’t hold any water? Regulations are supposed to provide security. Hasn’t anything been learned since the 2008 financial crisis? SEC compliant is this not the case and loans can be made without collateral? Should we trust anything with these claims?

My deposits into Celsius are one crypto currency and the other is a stable coin. I trusted that my money was safe on Celsius because of the fact that Celsius is regulated in the United States, so it must be safe, since they would never be able to make uncollateralized loans using my USDC coins as collateral, the regulatory body would never allow such a thing, especially after the 2008 financial crisis. This was my thought process, so it would have been better if they were not regulated in New York, because then I would have assumed that my money is not safe.

Doc 240, filed July 22, 2022:

[I] have been a Celsius user since 2021 and have a good amount of our family savings with them that we cannot access since June 12. I was using Celsius to generate yield and even gave up some collateral to take loans out to generate more yield.

Life throws people enough curveballs as it is and I feel this was a 100 mph fastball straight to the face.

Doc 230, filed July 23, 2022:

I deposited money on the Celsius platform as a retail investor who wanted a chance to actually make the gains that the ultra wealthy and rich have done for years. But it turns out it was too good to be true. In total I have about 60% of my partner and my savings on their Earn platform between several cryptocurrencies currently as of this writing totaling $10,649.91.

Doc 229, filed July 23, 2022:

Thank you for hearing the voices of our community. My crypto holdings in Celsius were most of my life savings. The loss of these funds puts my family into the worst financial situation before the possible recession starts. I’m a young professional who has also taken care of my parents and am now more than ever frightened to lose my job.

Doc 228, filed July 23, 2022:

I do have my hard working money for the past three years deposited in Celsius and I just find out I can’t withdraw, I’m a 56 old man with out job due to the low jobs in construction and hard to find something else special at my age and I’m asking please for help to get my money out from Celsius .

Doc 227, filed July 23, 2022:

My wife and I are teachers. The little that we have saved we had invested in Celsius.

Please do not liquidate our crypto and converting it to US dollars. 18k may not seem like a lot, but it is a lifetime of saving for us. This will inevitably greatly affect our future and the future of our children.

Doc 225, filed July 23, 2022:

I am the eldest son from the Philippines, who deposited my cryptocurrency to the company Celsius Network. My account balance is in the low five figure range when denominated in US Dollars. Me and my family are severely impacted financially due to bankruptcy, caused by the CEO Alex Mashinky and his colleagues at Celsius Network.

Both my parents are senior citizens, whom I care for and my assets currently held in Celsius were intended to support them in their last years in comfort. I pray I will soon see most of my funds returned soon.

Doc 222, filed July 26, 2022:

First of all, I am well aware of the accountability resting upon me for where I invest my money and will own what is mine. Looking back, obviously I should have done a greater due diligence before entrusting Celsius with my hard earned dollars, which sadly is all in their Earn account. This is one of the most devastating experiences of my life but even more painful, is that I advised my three sons to invest with Celsius and now they also are facing tremendous losses as well.

Doc 221, filed July 22, 2022:

I am a Celsius customer, currently with about $16,933.65 (as of July 20, 2022) worth of deposits that are locked up in Celsius earned account. … $16,933.65 may not mean a lot of what was $36k - now down since crypto market is down, but it is 70% of my life savings. … Losing all my savings will have irreparable consequences on the well-being of myself and my family. I am the bread winner of the family and thought I was doing the right and safe thing by putting my cryptos in Celsius because they claimed to be most safe and are for the little people. I am ashamed, humiliated, and disgusted that I put all my trust into a company that has now been revealed as clearly participated in a near fraudulent activity. I will be spending years trying to make back the money I lost.

Doc 218, filed July 25, 2022:

I currently have 1 Bitcoin [~$22,600 on date of filing] and 15 Etherium [~$24,000 on date of filing] stuck in the Celcius network. I have been investing in Crypto since 2017 and I ended up stumbling on Celcius’ network back on April 13th. I am currently not an accredited investor. Everything was fine of course until my life was turned upside down when Celsius announced on June 13th they were freezing our accounts. Since then I haven’t slept much, knowing that five years of hard work are now down the drain. The most infuriating part is that their employees continue to be paid, and for what, I have no idea. As customers we cannot do anything with our Crypto other than log onto the app and watch our money in purgatory. Only my wife and a close friend know, I’m too ashamed to let anyone else know.

Doc 217, filed July 22, 2022:

I personally have about over a million dollars in BTC and Ethereum, in todays prices, that I can’t withdraw from Celsius, not including the 500,000 CEL token that I haven’t counted. Most of us are feeling very stupid and ashamed. We have been conned by the ultimate con artist. This company has ruined peoples lives.

Doc 214, filed July 22, 2022:

Clearly Celsius made many missteps and I too feel misled and have suffered enough financial harm that it will impair the way I live for the rest of my life.

Doc 213, filed July 23, 2022:

I am a crypto investor in Celsius Platform, resident and citizen of India. Ever since Celsius has blocked the withdrawals and transfers of currency, I lost the access to my 3.15 Bitcoin [~$71,500 on date of filing] which were invested on this platform across 2 accounts. This money is my lifetime saving and my families and my future were depending on it. I chose Celsius as they often claimed to be very secure and an alternative to a bank, but I was wrong. There may be investors who lost much more than me, but for me these 3.15 Bitcoin mean half of a lifetime, something I could never afford or imagine to lose.

Doc 212, filed July 22, 2022:

My mother died from Multiple Myeloma (blood cancer) in 2018 and I was a beneficiary of her Trust. I used most of that inherited money to buy bitcoin and a few altcoins in 2019. After seeing Celsius advertised on Youtube channels and after reading about Mashinsky, I decided to move my crypto into a Celsius Earn account so I could earn interest on my crypto. It was a modest amount of interest. About $25 per week in interest payments but I trusted this was the right move. I’m 56 years old. Alex Mashinsky has bankrupted my retirement.

I could go on for several more pages about how we investors were lied to, misled, tricked and defrauded, and how Mashinsky and his friends looted the investor’s crypto, took insanely risky bets with our crypto, and tried to launder money through an Israeli crime ring but I have exhausted my desire to live. My passing is 100% the fault of Alex Mashinsky. Mashinsky and his crime ring have stolen over $60,000 from me.

Doc 206, filed July 23, 2022:

I am a retail investor with asset valuing approximately $32,200 on the Celsius platform. This sum might not mean much to some people, but it constitutes about half my life savings and has dire implications for myself and my family.

Doc 205, filed July 25, 2022:

The deposit amount consists of savings of both my parents and my savings from a combined working history of over 65 years. The emotional and mental stress that I have suffered from having my deposits frozen is considerable and I am trying to keep myself from falling into a deeper mental and emotional hole. Suffering from chronic back pain since eighteen years old-over 35 years and no longer having access to my deposits, I have applied for welfare to make ends meet in the future since employment prospects are minimal with my condition and age.

Doc 204, filed July 22, 2022:

I am a retired senior citizen of the USA. I saw no opportunity to earn interest on my life savings in a traditional bank and inflation is at record highs. I trusted Celsius to give me a reasonable rate of return on my life’s savings of about 5%, which I hold in stable coin, BTC and ETH. I own no CEL. I was mislead by Mr. M, who said that Celsius loans were over collateralized and that my money was safe. Now, I am facing financial ruin. Please do whatever is possible to save depositors’ money and please allow us to benefit from increases in crypto prices that will surely come at some point in the future. In the meantime, I pray for all of us who are suffering financially and emotionally because of Mr. M. The mental pressure is almost unbearable. The actions of Mr. M. have created unspeakable misery for many people and I am sure will result in suicides. I’m crying as I write this and feel sorry for us all. I would appreciate anything you can do to help make us whole.

Doc 198, filed July 25, 2022:

I write to you to let you know the devastating impact that Celsius is having on my life. My husband and I put in a combined amount of $138,000 USD into Celsius trusting their intent and care for customers. The thought of losing that amount of money is horrifying. That was our life savings. It was our chance of having a baby, and funding medical expenses. It was our chance of taking care of our parents as they age. Since the halt of withdrawals, I have not been able to sleep or eat properly. I have been emotionally distressed which is impacting my marriage and my life. I feel like I just cannot get up each day and keep going. My mother, who passed away of cancer when I was 19, left me with some money that I put into Celsius. If I do not get that back, I will end my life as the loss will impact my family and I significantly.

Doc 197, filed July 23, 2022:

My aunt is a 72 year old domestic helper. She’s been working all her life to support her family while taking care of mine. Specifically, she’s been working with my family for the last 33 years. Needless to say a domestic helper’s salary barely covers living expenses for her family, yet alone savings. As a sign of gratitude, I created a Celsius account for her as a way to build and grow her retirement fund so she can go back to her home country and live her remaining year in relative comfort, as she deserves.

From small monthly deposits, and a few lucky decisions later, he account grew to USD40k in slightly under 2 years. This made her a millionaire back home which allows her to live a decade (based on life expectancy) in great comfort, the ideal retirement. She was due to retire in August 2022 and I was only planning to pull assets out of her account in mid August.

Needless to say, I now can’t withdraw assets from Celsius and she no longer has a comfortable retirement to look forward to. She continues to be employed by my family which we are more than happy to have her. But at 72, and weeks from retirement, I cannot begin to imagine how debilitatingly disappointed she must feel.

Doc 196, filed July 22, 2022:

I have most of my long term savings, including a downpayment for a house in California, which is a significant amount tied up in Celsius, because since day 1 I believed that everything is all backed up, deposits are safe, there is enough collateral and so on. How can you face your spouse and tell her that all the savings and the downpayment for the house are gone?

I live in United States of America, one of the greatest nations in this world, we are not in some 3rd world country swamped with corruption on all levels, and people robbing people on the streets as a profession. Why wasn’t Celsius overseen by the necessary institutions, I’m sure to get a licenses to operate the way Celsius has, there are government institutions that must oversee those balance sheets, the loans, the money, the lending. How is it even possible that a company gambles away billions of dollars, because it’s growing too fast and betting on a future where crypto currency value only grows in the short and long term, now this is extremely risky. Where was the oversight?

Doc 195, filed July 23, 2022:

I had 95% of my life savings in Celsius as I was made to believe that it was a safe and secure account where I could earn 1% interest on my bitcoin. I had 21.7 of them [~AU$705,000, ~US$493,000 on date of filing] in their across 3 accounts. I deposit 13.2 bitcoins [~AU$429,000, ~US$300,000]36 minutes before I receieved the email saying no more withdrawals and it has come to my attention that withdrawals had been halted long before the email was sent out and so it was misleading of celsius to continue accepting deposits knowing full well they were insolvent and my money was about to disappear.

I have less than $30k now in my bank account, I have more than $330k AUD owning to the Australian Tax Office, and I have a $1.19m mortgage that is about to explode to a 16% interest rate because I will very soon be defaulting on my payment.

I have suicidal thoughts and the only reason I hadn’t already taken my life was the burden that would leave my family, and I have lost 15% of my body weight in 6 weeks from the stress of suddenly losing everything that i’ve spent my entire life building. Worst of all, my mother split my home with me so if I default on the home she’ll be homeless at 60 years of age with no other savings and her rock bottom to a place with no out will be on my hands and I just don’t see a way where I can recover.

Doc 184, filed July 22, 2022:

I personally have around 10/15 thousand US dollars worth of assets sitting on Celsius at the moment, which I have been blocked from withdrawing. This is a reasonable amount of money for me and I’ve lost most of, if not all my crypto and savings.

Alex Mashinsky scammed me out of almost 0.4 BTC, along with some other coins too. I have lost the money i was saving towards a deposit on my own house. Alex has cost me a fortune while he enjoyed my funds to live the life of Larry, spouting lies and complete mistruths to obtain more money from investors to take outrageous risks with our money.

Doc 183, filed July 22, 2022:

At this moment, as I am writing this letter, and the current market conditions I have $23,653.98, which $13,024.05 is held in USDC stable coin. All my coins are held in the “Earn Account” b/c I was supposedly “Grandfathered In”, since I live in the United States and I’m not an Accredited Investor. I am a Single Father, Full-Time Dad, no breaks, and this is my life savings. I know it’s not much, but I was trying. With All money cryptocurrency locked up in Celsius this is taking a toll on my health, family, mentality, sleep, and any other emotion you could imagine.

Doc 180, filed July 23, 2022:

I had a plan. I am separating from the United States Military this week. I had saved over $100,000 which I deposited in Celsius Network in 2021, primarily as USDC. That money was set aside to support me through my post-military education. It took me decades of sacrifice to save that money. Like so many other people, the fund lock-up at Celsius has had a downward spiral impact on my life and I have had to borrow money from family just to make ends meet.

Doc 179, filed July 23, 2022:

I am a small depositor – an 84 year old widow on social security. The deposit was my life savings to pay for home care when I’m no longer able to care for myself. I don’t have years to wait for my saving to be returned. I made this decision after I watched the terrible care my husband received in a rehab hospital that also was a nursing home. My time on the platform was just over one month, and I took no loans. My assets were 1.46621 BTC [~$33,300 on date of filing], 7.748 ETH [~$12,400 on date of filing], and 50 LTC [~$2,800 on date of filing]-a tiny amount compared to the vast amounts other may have lost. However, now I have to face the fear of the pandemic mistreatment of the ill elderly in a nursing home.

Doc 178, filed July 22, 2022:

I am an Irish/Australian retail crypto depositor into the earn account. I am 42 years old and have a 4 year old child. For the last 2 years I have been steadily purchasing Bitcoin and Ethereum with a firm belief in the ecosystem and its possibilities. I am a refrigeration mechanic/electrician working in the large commercial industry. My job involves very heavy lifting, working in extreme weather conditions here in the far north Queensland tropics and very long hours given the lack of people in my sector up here. The plan was to work a ridiculous amount of hours and live in a very cheap run down property to maximise savings. The end game was to buy a house for myself and my child. I have no family over here and nobody to fall back on so I had to come up with a plan. I have lost everything. How can I explain this to my son? I feel ashamed at myself.

Doc 177, filed July 22, 2022:

I feel really betrayed from Alex Mashinsky and his company Celsius. He published so many videos in the last two years about how good Celsius is, that all customers are protected because of a high insurance from Celsius. Mr Mashinsky also said that the funds of customers are always accessible. I have over $76000 US Dollar worth of funds on Celsius…

Doc 175, filed July 22, 2022:

I too, was led to believe that Celsius was the “safest, most transparent home for crypto”, and for that reason held almost the entirety of my assets with them - emphasis on past tense.

Now, I am presently in a position whereby I can’t make rent and I am well behind with my tax savings as I had entrusted them to look after my funds. I am in major need of money and feeling somewhat helpless, especially as a small holder; powerless.

I was a keen purchaser of and believer in Luna Classic – for a decentralised future - before its collapse and for the seasons stated above, also kept 100% of my Luna (equating to 85% of my cryptocurrency wealth) with Celsius. Following the de-pegging of UST and the collapse of Luna I was desperate and resentful, as well as having the overwhelming feeling of stupidity on my own part.

However, all was not lost as I still had money – worth roughly $1300 today – on Celsius, which may be pennies to some but would drag me from the hole I find myself in. I am particularly interested in my 770 MATIC [~$700 on date of filing], which again wouldn’t be worth writing about for most, but to me represents a chance at a better future for myself and a chance to eventually begin to average into that asset once more with the hope of being in a better financial situation in years to come.

As things stand, I have roughly 100 Euro in my bank account with a personal loan of 130 to repay monthly, and no means to even make the rest up. As mentioned before with my tax savings, I am in the first year of self-employment so things are very, very hard anyway. The jump, believe it or not, was due to the fact that I had managed to accumulate almost $15000 with Luna and therefore had a ‘safety blanket’ to see me through the opening stages of my new adventure, yet here I am.

Doc 173, filed July 22, 2022:

I have been a Celsius Network customer since 3 rd March 2022. My husband and I each have a Celsius account, and I also have an account for my self managed super fund. In total we deposited circa $240,000 AUD of crypto assets to the Celsius Network, which is a significant portion of our life’s savings and retirement fund.

I have a history of mental health issues (anxiety, stress, depression) and this event has caused me significant distress. Losing this amount of our savings will have irreparable consequences for our family. I feel betrayed, misled, lied to. I am ashamed that I was deceived by Alex Mashinsky and Celsius Network.

Doc 172, filed July 22, 2022:

I am 65 years old and have put all of my life savings into Celsius. Not all funds initially, but over time as I grew more confident of Celsius. This confidence grew through listening to the CEO, Alex Mashinski every week on the AMAs where he would explain what Celsius was doing and how safe it was compared to the traditional banks.

Doc 171, filed July 21, 2022:

I am a 40 year old husband and father of two boys and was confident enough in Alex to put the a significant portion of my life savings into the platform to help secure the well-being of myself and my family. I understood the risk of digital assets but was fine taking that on as these assets were intended for long-term use. However, with regard to any risk I was taking in terms of Celsius as a platform, I was blatantly, purposefully, and shamelessly misled by the lies of Alex and those around him. … What has happened to my funds has caused incredible grief and pain to myself and my family, the amount of which cannot possibly be expressed in writing.

Doc 170, filed July 21, 2022:

I am 59 and I put close to $300,000 into Celsius (nearly my life savings), most of which was in USDC. At the time I believed that since USDC was a stable coin backed by actual dollars, my money was safe.

I feel deceived by Alex Mashinsky who on weekly AMAs repeatedly declared that our funds were safe and would be protected by Celsius. I accept responsibility for not reading the Terms and Conditions more carefully, but I could not believe that what Alex was saying on a constant basis would be so clearly contradicted by the Terms and Conditions. Alex repeatedly sold and presented Celsius as a low risk savings account.

Doc 169, filed July 21, 2022:

I started giving possession of my Crypto to Celsius to gain the yields from staking in Dec 2021. I did some research and amongst many positive reviews one of the attractive reasons was Alex Mashinsky’s AMA’s statements saying;

Unlike banks that do that and keep all the profit to themselves, in the Crypto world we give most of the profits or most of the yield back to the community”

If something bad happened with Celsius deployment, will Celsius stand behind it? Yep! That’s where companies are tested”

From this my trust to give possession of my crypto to Celsius to gain yield started.

Dec 2021, Jan 2022 transferred $30,000 USD of ETH to get a $200 promotion reward.

March 2022 transferred more than $120,000 USD of BTC from my Australia crypto exchange,

May 2022 $3,500 USD AVAX.

A loan for $12,500 USD locking up $50,000 in collateral BTC

The loan bought a miner and the BTC mining rewards deposited straight to Celsius.

It’s one thing to think to put crypto into an enterprise that is managing transparently and successfully and another that is lying and continuing to make dishonest claims, so I continued to put more in.

Doc 168, filed July 21, 2022

I am writing you on behalf of my husband and I, who are a both concerned customers of Celsius and deeply troubled by the uncertainty of our assets within Celsius. We are conservative investors and were made to believe Celsius was a low-risk yield opportunity.

We currently have about $44,000 of equivalent funds in Celsius and the loss of our savings would have a devastating impact on our financial lives, set us back many years and be difficult to recover from.

Doc 165, filed July 21, 2022:

I am a “small fish” when compared to others, but I have invested over $50,000 dollars into Celsius and I fear that I will never get it back. I am embarrassed and ashamed of myself to have been taken in by Celsius and the claims they made. Mr. Mashinsky openly stated over and over in AMA’s and interviews, that Celsius was a “safe alternative” to the traditional banking system….. What a lie and I fell for it….

Doc 163, filed July 21, 2022:

I have recently retired after serving 34 years in the Fire Service, I retired out after having a heart attack. If my body did not give up I would still be on the floor serving my community. But that’s not how it worked. Once I retired I realized that whatever savings (457) I had, I had better treat with the utmost caution. After looking at our financial landscape, particularly over the last few years and watching how our government chose to handle it, my Econ 101 kicked in and I realized we (collective we) we’re heading down the inflation road and a crash similar to 2008. In 2008 I lost over 40% of my 457, and at this stage in my life I couldn’t endure that financial hit again. So after some research and having a very tech savvy son, I became interested in crypto currency, more specifically “Block-chain” technology. … Initially I placed my 150 Etherium crypto [~$229,000 on date of filing] and 47,000 Cardano (ADA) [~$23,000 on date of filing] into “Block-Fi” and held my crypto for 1 year with no issues, then I received advertisement for Celsius. … I moved all my Crypto holdings to Celsius based completely off of the overwhelming positive feedback. And, now I find all that information I had gathered was curated B.S.

Doc 161, filed July 21, 2022:

These are a big chunk of my life savings and it is heartbreaking to just see these coins I have slowly acquired be stolen from me.

The BTC and ETH are my main holdings and were my long term life savings focused investments, since I have full confidence in these coins for many years to come. I never expected that they could just be taken from me at will by Celsius.

Doc 160, filed July 22, 2022:

I put all my personal savings that were sitting in a bank account for various needs. Including purchasing a car in the very near future, maintaining my home, vacation savings, and extra funds for unexpected events.

Well I had an unexpected event. Carpet in my house got ruined. The carpet was growing mold and making myself and family sick. So we had to replace it before we ended up in the hospital from constantly breathing in mold. I had to sell some of my retirement investments in order to pay for the carpet. Had I had the savings that I transferred to Celsius, I would not have had to dip into my retirement funds.

I also had a long weekend vacation planned. I was going to use my savings to pay for it. Again I had to sell retirement investments to pay for the vacation.

I also sold $50,000 from my retirement investments and put them into Celsius. It took me years and years to save that money. Not sure if Ill ever get that back.

At the time of this letter I have over $99,000 with Celsius. $50,000 being from retirement and $49,000 being my personal savings.

Doc 159, filed July 21, 2022:

I have approx. 7,000 worth of assets stuck on Celsius. To some that may not be much. To others like myself, it is a huge part of my investment. You may be thinking that I deserve this and I’ve should have gotten out before Celsius paused withdrawals. Maybe so. But I hope there is a part of you that sees many people losing out on their investments/life savings. It’s a real shame that this happened to people who like myself are just trying to improve their quality of life by increasing their net worth.

Doc 158, filed July 21, 2022:

I’m from Brazil and I have 0.1 BTC [~$2,300 on date of filing] on my earn account. I know it can be considered a low amount when compared to other users, but for me it is a significant amount.

Doc 157, filed July 22, 2022:

I am a single mother of 2 daughters who are going to college next year. I have supported my parents and my daughters by myself for whole life. I am struggling hard for living. I saw Celsius advertisement and promotion through media and deposited my cryptos which I purchase at the top price from Coinbase Pro last December. My cryptos on the Celsius are maybe not big money for Mr. Mashinsky and his high salaried staffs ($30,000 monthly income after filing Chapter 11), but it is huge amount of money for my poor family. Like many other depositors, I and my family are severely impacted both in financial and mental health by the bankruptcy and locked up cryptos. I always check the app if my cryptos are still there. I can’t focus my job or sleep. I deposited my cryptos on the Celsius because they always claim that Celsius is SAFER than traditional banks or even other Crypto companies through the medias.

Doc 156, filed July 22, 2022:

This has an immense impact on my life and finances as I have almost $43,000 frozen in my account without the ability to access. Like many others, I am very close to retirement and based on information shared, felt that this was a very good platform.

Doc 155, filed July 22, 2022:

I, like many others, have my 6 six figure life savings currently trapped within Celsius Network. I made the decision to move my cryptocurrency which I have been slowly building up since 2017 to Celsius Network due to my understanding that they were providing loans that were over-collateralized to individuals and institutions.

Doc 154, filed July 21, 2022:

I have—at this time–$120,000.00-worth of hard-earned funds in Celsius…

The amount of Crypto that I’ve entrusted to these criminals represents a massive portion of my entire savings. A portion of this Crypto was purchased with money earned from 20-year EE Bonds that I purchased every month while I served as a Rifleman (0311) in the USMC, from which my discharge was Honorable. … The funds that I’ve invested have taken a lifetime to raise. Life will be hard without these funds, even if there are no emergencies. If there is an emergency, then there is simply no way that I could stand against it without these funds; it is crucial that they are returned to me.

Doc 153, filed July 22, 2022:

Even worst I convinced my wife to take her money from her bank and converted into usdc to deposit into Celsius, now she has 12.000 Euros in Celsius account. Since I started to buy Bitcoin in 2018, I saved every euro from my salary to invest in a future where I could feel safe and protect my family, now I feel that lost all after they canceled withdrawals and I want to die, my life has become a complete mess, a lot of depression and I have one month not sleeping and feeling miserable due Celsius.

I have right now 1,80 BTC [~$42,000 on date of filing] in Celsius and that’s the money I’m planning to give to my daughter when I pass away, please help us many people is suffering due Alex.

Doc 152, filed July 21, 2022:

I wanted you to know that I have my life savings held up in a Celsius Network account. The impact of not being able to withdraw my deposits has left my family in limbo and uncertainty of what the future holds for us financially. The filing of bankruptcy by Celsius Network LLC has added a lot of stress to me and my family. Depending on the outcome, we will need to delay our retirement plans and continue to be in the work force instead of enjoying our retirement. We will be forced to make up for the deposits we will potentially lose.

Doc 149, filed July 22, 2022:

I am a depositor with Celsius and I currently have 7.1599751 BTC (Bitcoin) [~$73,000 on date of filing] + 54.666429 ETH (Ethereum) [~$86,000 on date of filing] locked on the platform, some of which is being used as collateral on various loans. I have already been liquidated on 4 of those loans as it was not possible to pay off the loan (which I had the money to do so) due to the locked status that Celsius imposed on it’s customers.

This accounts for almost all of my life savings which I invested in over a year ago and placed in my Celsius account earlier this year before the company collapsed. This is my life savings from more than 10 years of hard work and I cannot tell you how distressed and lost I am about what to do.

Some of this collateral was also funds that my family asked me to invest for them and I cannot bring myself to tell them what’s happened and am extremely depressed and have basically shut down mentally and cannot work or see friends due to this deep depression. I will never recover from this financial loss.

Doc 148, filed July 21, 2022:

If I were to never get my funds back I would recover, it would take time and some of the life goals I have would be set back further than I would like. But many people would be taking such a devasting blow that recovering would, at least seem, almost impossible. To build homes. To start families. To invest in businesses. To escape debt. To feed themselves. The list of possibilities better than allowing these crooks to get away with customer funds is infinite.

Doc 147, filed July 21, 2022:

Like many others, I had savings deposited into Celsius Network. I believe the total amount was about $5000 when Celsius froze all withdrawals. This may not be a lot of money to some but it is a lot of money to me and I worked hard to obtain it. I trusted Celsius Network with my savings as they advertised I could withdraw my money at all times. This wasn’t actually the case.

Doc 146, filed July 21, 2022:

I personally have 1.67+ BTC [~$39,000 on date of filing] and 83.9+ ETH [~$128,000 on date of filing] being held by Celsius. I am a retired school teacher and funds of that magnitude are highly significant to me.

Doc 145, filed July 22, 2022:

Currently I have my entire life savings & retirement invested in Celsius in the stable coin USDC in the amount of $205,001.66 I cannot begin to tell you the level of devastation and horror I felt when Celsius froze withdrawals.

Having my funds frozen has been devastating to me and my family both financially, mentally, and physically. I cannot sleep most nights and am over-whelmed with worry and dread for my family’s future. I have two small children. A 3-year-old daughter and a 2-year-old son. I am the sole bread winner for my family, and I pride myself on making smart financial and parental decisions for them to provide a better life and a bright/positive future.

I was going to be using my funds to finish building my home and complete the construction of my property that has already been underway for over 1 year. I am currently left scrambling trying to figure out ways to get myself out of this mess that Celsius has put me in.

Doc 144, filed July 21, 2022:

My wife and I are Celsius customers who have approximately $140,000 locked on Celsius…. Many lives have been destroyed by Celsius.

Doc 143, filed July 22, 2022:

I have well over $1,300,000 in this custody account which was worth almost $2,700,000 less than 12 months ago. I chose to move it into the custody account under the assumption that it was safe due to the well-understood definition of a “custodian” as well as Celsius’s own terms and conditions…

Doc 142, filed July 21, 2022:

I am a hardworking middle class husband and father who is struggling to make ends meet, every single week. At the moment, I have under $1,000 in my Wells Fargo checking account, which, as a result of the freeze, is my only source of funds to provide for my family. I live in California, where everything is egregiously expensive, and there is absolutely no way that I can continue to provide without access to my assets at Celsius. I request an immediate release of my funds under several pretenses, the first and foremost reason being that this is an EMERGENCY situation, simply to keep a roof over my family and food on their table.

Doc 140, filed July 21, 2022:

Thousands of everyday hard-working people and families stand to lose more than they can recover in their lifetime, while Alex Mashinsky, the CEO of Celsius will walk away a wealthier businessman. This is not justice. This is not right.

Doc 138, filed July 22, 2022:

I, myself, have a little over $20,000 in stable coins frozen in Celsius’ earn program. Not having access to that amount of money is devastating because I worked hard to save that up and could be using that money to pay off debt or bills in a time when prices, and inflation, are running rampant.

Doc 137, filed July 22, 2022:

I am the mother of [redacted] who filed claim. As she mentioned she is a single mother of 2 daughters, and she has supported me and my husband for whole her life. She is struggling hard for living.

Doc 136, filed July 21, 2022:

I am writing to you today as one of the thousands of unsecured creditors in the Celsius case who listened to the promises of Alex Mashinsky and transferred my entire retirement and life savings into Celsius in order to receive yield. I did this because I was led to believe that this was a safe alternative to a bank savings account. Alex Mashinsky told us, whereas banks charge customers up to 29.9% interest on credit card debt using customer money and keep all of it for themselves, with Celsius we share the interest with you and eliminate the risk…

It was devastating to learn, when withdrawals were stopped on June 12th and the truth started to come out, that they took my carefully accumulated life savings, part of which were the proceeds from the family home I had just sold in late 2020 in preparation for a downsized retirement, and recklessly exposed them to enormous risk, mismanagement and loss.

Today, not many months from retirement, I face financial ruin and a very bleak future if those funds are not made whole to me again and in kind. I divided my investment between a US dollar stable coin USDC to earn high yield now to live on; and some pristine cryptos that have an incredible upside potential, in the next five to ten years, to grow to several million dollars to keep me in my old age and to pass on to my children.

Doc 135, filed July 21, 2022:

As a personal plea, in which I am echoed by numerous depositors. I am a retail investor with a good portion of my life savings on the platform. I put my crypto assets as well as a good portion of my bank savings in Celsius relying on the fraudulent assertions of the Celsius executive management team, who attested repeatedly that our interest payments were based on over-collateralized loans with delta neutral risk. I also recommended this platform to friends, who are now also in the same situation.

Doc 132, filed July 21, 2022:

I (58 years old) saved hard for my pension gap that I have in order to bridge two years financially without any worries. before I start receiving state pension and old age pension. Now that has become very insecure and you are my (our) savior so as not to end up in a financial hole later. I will soon need my money to be able to eat and live.

My wife … (56 years old) has also opened a Celsius account on my advice and she has largely deposited her savings into it. My 80-year-old mother … also opened an account through me because the interest on the bank in the Netherlands has become 0% and she can continue to pay her bills carefree. After seeing another AMA of Alex M, the last one, was also where he said; open an account with us, it’s safe, you can win $1000 bonus!!! Finally, on June 11, 2022, my 23-year-old son opened an account and deposited his piece of bitcoin into it and a week later everything was locked. He was shocked and angry with me and said because of you I am now in this misery.

Judge Glenn, I could cry and feel very guilty for advising my family to Celsius. In retrospect it sounded too good to be true, we say in the Netherlands.

Doc 131, filed July 21, 2022:

On May 27th, 2022, after viewing several recent videos of Alex Mashinsky promising that my crypto assets would be safe and that I would receive 6.50% APY on my BTC and 6.00% APY on my ETH, I transferred 0.868842 BTC [~$25,400 on date of deposit] & 11.670072 ETH [~$21,000 on date of deposit] onto the Celsius Network. I was also promised $550 in 30 to 90 days as a promotion to entice me to transfer my assets to Celsius. I found that after I transferred my crypto assets that the actual APY quoted was only on a small portion of my holdings. Still, the actual APY was about the same as I was receiving else ware, so I decided to stay with Celsius to receive the promotional rewards. Just 16 days later, and after receiving no APY or rewards, I was informed that I could no longer withdrawal my assets.

Doc 129, filed July 21, 2022:

I am a Brazilian worker and I put all my money on this platform, as ALEX (CEO) said that we would be safe from the risks of banks and would offer a loan with an interest rate compatible with the market. It makes no sense to disappear with the money where it has a collateral, that is, I deposited 200,000 USD in bitcoin to withdraw the loan of 50,000 USD. The goal was not to have to sell my bitcoins during this market rally. Therefore, the collateral was practically 4x, or in some cases 2x, the loan amount.

Doc 127, filed July 21, 2022:

I placed my entire EIDL [Economic Injury Disaster Loan] loan, $525,000 in Celsius to earn an APY to help pay back the 3.9% interest on the loan while I was in the process of deciding on if I would keep the EIDL or use it on my business.

The funds in my Celsius Custodial account are not mine, they are the US Governments and I my entire business is secured and backed by these funds. If they are not returned, my business would go bankrupt, my 15 employees would be let go, and 14 years of my life’s work lost and at the age of 49 years old, I would have to start over with nothing. The thought of losing this money has left me depressed, suicidal, and without words. Please return our money.

Doc 126, filed July 21, 2022:

I have been a customer for about 1 year now and have transferred about $250k into Celsius. I was convinced by Alex Mashinksys AMA’s on de-banking and moving our money into Celsius.

Doc 125, filed July 21, 2022:

I’ve lost my farm here in Ireland , family are left homeless . I’m mentally unstable . Family are distraught with my decisions of trusting Celsius and promising them a better future.

Doc 124, filed July 21, 2022:

I have been a loyal Celsius customer since 2019 and feel completely lied to by Alex Mashinsky. I watched every single AMA (Ask Me Anything) each friday since sign-up and week in and week out Alex would talk about how Celsius is safer than banks because they supposedly don’t rehypothecate and use fractional reserve lending like the banks do. “The banks are not your friends,” he would constantly say.

The money I deposited is meant as my life savings and I know I’m one of many in this situation.

Doc 118, filed July 21, 2022:

I come from India to make American dream a reality and in the process, I worked hard and there are weeks that I worked for 84 hrs. a week just to make some savings, buy a home and build a life here. But all I get is disappointment and got cheated I invested all my savings for last 3 years and was able to get one full Bitcoin. Alex kept saying our investments are safe with Celsius, though there was lot of FUD on Twitter I believed Alex. I am just a normal guy trying to make a living here and keep my family safe and happy.

Doc 117, filed July 21, 2022:

I have held to the belief that Celsius would not engage in such risky behaviors as what has been revealed lately, and am shocked and appalled that my life is now back to square one as far as earning potential and safety for my family and young children. My life savings is gone thanks to these people.

Doc 116, filed July 21, 2022:

I sent Celsius a good part of my retirement and also my wife’s last year. Alex Mashinsky has said over and over how this was a safe alternative to banking, and led me to believe interest was generated with fully collateralized loans.

Doc 115, filed July 21, 2022:

I have approximately $7500-10k depending on BTC price locked up and cannot withdraw from my Celsius account. I am a teacher that took a $2500 usdc loan from Celsius last summer. I do not get paid in the summer and needed some funds to get through summer so I wanted to give Celsius a try as they advertise low interest loans by utilizing collateral. I transfered $7500 worth of bitcoin as collateral for this $2500 USDC loan.

As the price of BTC started to come down this June, I kept getting emails about margin calls in about myCelsius account and how I needed to add more BTC to not get liquidated, so I deposited 2500 worth of USD to pay off the loan so I could get my collateral BTC back but the site would not allow me to transfer or make any payments, and as a result, most of my BTC collateral was liquidated and stolen by Celsius to this point. The site was frozen and I could not even withdraw my $2500 USD out that I had just deposited. I have 2 children ages 4 and 6 and these funds could have been used for their development and family obligations.

Doc 114, filed July 21, 2022:

I am just a 50 year old, healthcare worker. I don’t have much compared to others, but it is a lot to me and my family. All my crypto is sitting in the CUSTODY account program. Today, the value of my holdings is $19053.45 but of course, it was worth double when I purchased and I am sure it will triple in the near future. I just want my crypto back.

I am frustrated, cant sleep, my husband does not know this happened. Please do us justice. Celsius lied to us, watch the AMA videos and you will see why we all believed.

Doc 113, filed July 21, 2022:

I am a Celsius customer with over 100k worth of deposits that are locked up in Celsius. This amount is about 90% of my life savings. Losing all of my savings will have irreparable consequences on the well-being of myself and my family. I feel ashamed to put all my trust into a company that has clearly participated in near fraudulent activity. I can’t imagine how many more years I will need to make back the money I lost.

Doc 112, filed July 21, 2022:

I am one of the customers who has my funds stuck with Celsius. Celsius is a company registered in the USA. Now USA being the frontrunner in almost every aspect from big businesses to new technological innovations, everyone would expect that if Celsius got its registration license in the USA, they must be running a legitimate operation, as USA is known to be strict with legal compliances related to businesses. Moreover, CEO of Celsius, Alex Mashinsky, prior to the halt of withdrawals, used to come live every week and assure the customers that Celsius is fully transparent and customers’ funds are safe. I am from India and I have $14,000 stuck with Celsius. This amount is a huge amount for an Indian. An average Indian makes $5000 a year. With my $14,000 stuck with Celsius, I have been very stressed and suicidal since the halt of withdrawals. I am the sole breadwinner of my family and its my responsibility to take care of my family members and provide food on their plates. $14,000 might not be a huge amount for an American but for me, an Indian, it is years of savings.

Doc 111, filed July 21, 2022:

I started reviewing e-mails on my phone. I saw that there was an e-mail from a Crypto company that was holding about $40,000-$50,000 worth of my assets (depending on current market price). The subject of the e-mail stated that it was an important message. I opened the e-mail and began to read. By the time I finished the e-mail I had collapsed onto the floor with my head in my hands as I fought back tears.

I did my best to go the office and face my peers on June 13th, 2022. It was impossible to focus on my tasks for the day. It was like a living nightmare. However, it was nowhere near as bad as when I returned home to face my family.

My family is what would fairly be considered middle class. My wife is a teacher and I am a sales manager. It is my job to manage the family’s finances. Throughout the past two years I took an interest in trading cryptocurrency. I made a respectable profit and decided that I wanted to start a nest egg with the 7 Ethereum (valued at approximately $25k at the time) that I had earned through my trading efforts. Through a recommendation of a friend I came across Celsius. I reviewed their web site and began doing research by watching their AMA’s and reading reviews on the internet. I liked what I saw as Celsius seemed like a very transparent organization that would allow me to earn returns on my cryptocurrency as if it was in a bank.

Every day since June 13th, 2022 I have gotten up and felt terrible for a portion of the day. I look at my children and think how the money that Celsius seized from me could be put towards improving their lives. It could have been in a college fund or it could have been put towards a vacation for them to enjoy. Instead, our hard earned money was gambled away like nothing by the operators of Celsius.

Doc 110, filed July 21, 2022:

I have been a customer of Celsius for nearly 2 years. During this time I took out two crypto backed loans. I used the money to finance a business venture. Last month one of my loans was closed and my collateral was liquidated. I would have added more collateral, but was advised not to do so given the fact that Celsius had paused transfers and withdrawals. The liquidation of my loan has costed me approximately $21,000. Presently I have approximately $65,000 in savings on the Celsius platform. I put my savings there because I felt I could trust the platform and company. This trust was generated by countless hours watching Alex Mashinsky give press interviews in which he sold Celsius as a safe and secure option for savings and lending. I work in technology and have an excellent understanding of blockchain and crypto currencies. I performed due diligence on Celsius, only to learn that I have been lied to.

Doc 109, July 21, 2022:

I’m writing in regards to Celsius Network and their practices that have left my family and I in dark times. I joined Celsius Network earlier in the year and had deposited $15,000. Everything I had remaining for a purchase of a home for my two children and wife here in SouthWest Florida. I trusted Celsius so explicitly due to Alex Mashinsky constantly broadcasting what I thought were truths and axioms that the company and himself lived by. How clearly I was wrong. I took out a $1,000 and $5,000 loan and was unable to add necessary collateral to two margin calls that were enacted during their pause of transfers and withdrawals. The collateral was available and ready, only to watch nearly the entirety of my crypto evaporate away with no recourse to solve. I feel absolutely disgusted with what has since unfolded.

Doc 108, filed July 21, 2022:

I had hundreds of thousands of dollars in USDC and Bitcoin deposited in Celsius. As part of the decision to store my assets on Celsius over the past 14 months, I listened to, and believed, Mr. Alex Mashinsky speak to the trustworthiness of Celsius on live streams, in print, and as part of the Celsius AMA (“ask me anything”) conferences he held on Fridays.

Doc 107, filed July 21, 2022:

I am one of many Celsius users with crypto on the platform. I deposited stable coins, believing that the yield was being generated from over collateralized loans, which Mashinsky is on record stating many times. I watched the AMAs weekly, youtube videos and twitter communications from Mashansky; he misled all of us, stating he had 2 billion in reserves, no exposure to risky practices including overleveraging. Had I known the loans were under collateralized, the balance sheet deficit, the staking, trading, etc. I would not withdrawn my coins. I avoided Terra/Luna, instead choosing stable coins backed by dollars.

Doc 104, July 21, 2022:

I am a female client from Australia with crypto deposits on the Celsius Network. Similar to many other retail investors, I and my family are severely impacted both in financial terms and mental health by the bankruptcy and locked up funds. I am expecting my third child in 2.5 months and need the money to pay for the doctor, hospital and expenses. Also, my aunt is seriously ill and needs my financial support for her major operation (please refer to screenshots provided below). However, all of my savings have been tied up in the Celsius network. I was planning to withdraw from Celsius to fund my birth and my aunt’s operation in late June, but due to the withdrawal halt, I don’t have access to any funds and my life has become so miserable now. I am worried that my stress due to Celsius’s situation will affect the health of my unborn child. Also, my two other children are still in primary ages and my family also need to fund locked in Celsius for their education.

Attached copy of an email sent to Alex Mashinsky and Celsius support

Doc 103, filed July 21, 2022:

I have over $25,000 worth of cryptocurrency deposited in a ‘Custody’ account with Celcius. I strongly feel that Celsius, in particular Alex Mashinsky has lied to the community about the safety of our assets. I feel like I have been lied to and mislead. I am embarrassed that I have so much money tied up in what now seems to be a scam and mismanagement of funds. It has affected me personally and now have so much anger with myself for getting my family in this position.

Doc 102, filed July 21, 2022:

Over the last year, I’d put most of my money into Celsius. I had done some research that led me to believe they were insured for any losses. As I watched companies (who had due diligence teams) put hundreds of millions into Celsius, I began putting most all of my digital currencies onto their platform. I never realized they would do the things they’ve done. I’ve put a lot of time, sweat, and money into mining digital currencies over the last year, and I really hope it’s not just all gone, now. Weekly, I watched Celsius’ “ask me anything” videos and would watch Alex himself say repeatedly they’re not doing shady things with our money … but it seems they were. I feel betrayed by Celsius, and shame that I even went so far as to recommend Celsius to friends and family.

Doc 101, filed July 21, 2022:

[I am] a Finnish Citizen who has invested over 50 thousand USD for Celcisus Network’s loan service. I have always been very conservative investor and invested to Celcius’s service ONLY, because Alex Machinsky has continuously stated, every Friday, that they are secure. They have made claims such as:

Celsius is an alternative to conventional banks, they are safer than banks
They have over 2 billion in their balance sheet
They raised 750 million "to secure customer assets if something goes wrong"
Continuously assured that the funds are safe

And so on. The whole company is a lie, we were lied to! We were deceived, I am embarrassed, sad and angry that my life savings were invested to a “bank” which was a lie. This will have significant ramifications to my retirement and it is beyond awful.

Doc 100, filed July 21, 2022:

Much of my life’s savings are currently held hostage on the Celsius platform. Alex Mashinsky week after week promised the community that our funds were safe and not being used in any risky lending. Every week during his AMA’s he promised that Celsius had the funds to cover all user assets and that under no circumstances were our funds at risk.

I have elderly parents whom I care for and the assets currently held in Celsius is to help them live out their last years in comfort. I pray I will see my funds returned in full.

Doc 99, filed July 21, 2022:

When I joined Celsius i followed every AMA and live to listen to what the CEO Alex says and update, and from what I alway heard the investment where safe, and not speculation was used in our money, plus he said multiple time they had enough cash, more then any one else to cover any issue. Some of this live were done days before they freeze assets, so Alex was lying and he knew was a lye but he kept saying that. My brother tried to suicide and I had mental disorder and I cannot sleep now, I havent slpet since the account was frozen.

Doc 95, filed July 21, 2022:

About 6 months ago I deposited 20k in BTC and ETH to Celsius (my hard earned life savings). I followed the company for more than a year before I decided to let them hold my portfolio. I spend 100+ hours listening to Mr. Mashinsky and the communication of the company. Every Friday they uploaded video’s on YouTube discussing the policy and the low risk you take as a costumer. Quotes that where said every week for over a year: “The worst thing that can happen is that everyone gets their coins back”, “We have 2billion dollars on our balance sheet so there is zero risk in depositing your crypto on Celsius.”, “Celsius is transparent and shares all of it’s financial data.”, “Celsius is safer than holding your money in the bank.”, “Celsius will take full responsibility and will make sure depositors are always prioritized.”, “Celsius is more regulatory compliant than all of it’s competitors.”

Doc 94, filed July 21, 2022:

I’m a Celsius depositor. My account balance is in the mid six figure range. The balance was in the seven figure range last year when cryptocurrency prices were at their peak.

I consider myself to be “above average” in terms of understanding financial markets, as I hold an economics degree, but I am by no means an expert. The primary reason I was comfortable with Celsius was because Alex Mashinsky repeatedly stated on numerous youtube “AMAs (ask mashinsky anything)” and interviews that the yield paid on our cryptocurrency deposits was generated with overcollateralized lending. While I am no financial guru, to me, overcollateralization meant that if a debtor could not meet their obligations that Celsius would liquidate the posted collateral and ensure that the lent crypto holdings were retained.

While I am fortunate to continue to be able to support my family despite this mishap, I worry about the financially vulnerable individuals who put their life savings into Celsius because they were encouraged to do so by Alex Mashinsky, despite the fact that he knew that the company was struggling from a financial standpoint. Single mothers, retirees, and other vulnerable individuals absolutely need their savings back.

Doc 92, filed July 21, 2022:

I am very affected by Celsius Network freezing my account and filing bankruptcy due to lack of risk management and false promises. Even though my assets were not in six figures, that was the majority of my life savings and retirement fund. As per their marketing and promotion, they promise withdrawal of our assets anytime. But When I tried withdrawing my cryptocurrency on June 13th, they did not let me withdraw.

Doc 90, filed July 20, 2022:

I am one of the many customers affected by these proceedings with a large portion of my savings…

[B]eginning on 13 June 2022, I was stonewalled into having a loan with Celsius liquidated. This was primarily due to Celsius freezing transfers which took away all ability for users to manage their loans on their own. This forced users to rely on their support team, which was not able to react in time. Celsius froze transfers on 12 June 2022 and directed customers to contact support in order to resolve a margin call, advertising a 24-48 hour response time. On 13 June 2022, I received notification of a margin call and e-mailed support attempted to call their customer support line only to sit on hold for 4 hours only to be hung up on. My loan was liquidated on 18 June 2022. The first time I heard back from Celsius regarding this matter was 21 June, 8 days after initial contact, saying nothing can be done about it now. I requested a refund of the liquidation fee to show a sign of good faith to the customers only to be ignored again.

Doc 89, filed July 20, 2022:

I am an unaccredited investor who trusted Celsius with over $530,000 of Crypto Currency as of today Wednesday July 20th. As of April 2nd, 2022, this bucket of Crypto was valued over $1,000,000. I moved the bulk of these funds into Celsius in February of 2022 because I would Watch Alex Mashinsky on his weekly AMAs published on YouTube. He reiterated time and time again on Twitter and on these AMAs that the company was over collateralized and that should anything go wrong they have more than enough money to make all depositors whole. He also started that he himself would personally compensate investors to make them whole if ever needed.

Doc 86, filed July 20, 2022:

I was one of many common retail investors that invested my money with Celsius after their constant advertisements and promotions of “Earn great & safe APY returns like the rich. You can access your money at any time, your crypto is always safe with us.” On and on the false promises went.

As a disabled Combat Veteran who served in the Afghanistan Campaign, it hasn’t been easy for me to maintain employment and save money to build a future retirement for my family. So, I have been saving for years to amass the sum that I had in Celsius. To Celsius I am but a minnow in a sea of whales. My 36k loan to Celsius that took me nearly a decade to save for with dedication and hard work for feels completely insignificant.

Please help us common tax paying citizens who were just trying to get a fair shake at trying to save for the future while beating inflation rates.

Doc 83, filed July 20, 2022:

I share a similar story as other depositors and investors of Celsius. I started depositing various crypto assets with Celsius Earn a little over a year ago (March 2021). I trusted Celsius with my funds and continued to do so despite market volatility and rumors about Celsius solvency on Twitter. CEO Alex Mashinsky reassured everyone on various media platform that Celsius is financially strong and had enough collateral to weather the downturn in the market. I left my all of my ETH (about 60 ETH [~$92,500 on date of filing]) on Celsius in hopes for a modest return (not enough to beat current inflation) and now, like others, my ETH is locked and I have no way to access it.

Doc 82, filed July 20, 2022:

I am a Celsius amount holder, with .85 Bitcoin [~$19,900 on date of filing], 1 ETH [~$1,500 on date of filing], and a various amount of other crypto currencies. I am writing to ask you to not grant Celsius to move forward with their current plan with Mashinsky, or any current executive leadership. I was clearly and unequivocally misled to believe that my funds were not used in risky leverage trading, and that they were completely secure unrelated to market conditions. It is obvious that there has been reckless misuse, and Celsius is not taking responsibility for their actions and cannot be trusted.

Doc 78, filed July 21, 2022:

I am writing to you today, as a Celsius user (since January 2021), that currently has my life savings in crypto locked and inaccessible. Alex Mashinsky and the Celsius Management Team expressed multiple times, on Tuesday Twitter Spaces and Friday YouTube AMA’s (Ask Mashinsky Anything), the following phrases: “UnBank Yourself”, “HODL with Celsius”, “Banks Are Not Your Friends” and “Do Good, then Do Well”.

Retail investors have even expressed “suicidal statements” on Twitter as a result of this unforeseen incident. I even referred friends and family to Celsius and their life savings are now in jeopardy.

Doc 71, filed July 20, 2022:

As of July 13, Celsius Network claims they are no longer liquidating retail loans or demanding margin calls, but accepting loan repayments and continuing to hold coins posted as collateral. As a retail user with two current loans due on August 14 and August 28, I want to honor my obligation of paying back the principal and interest on my loans so that I may receive my ~4x collateral back. However, it makes no financial sense to send money to a bankrupt company when it is unknown what will happen to my collateral. Sir, I am requesting special consideration for all future loans that are due and especially the ones that are ~4x collateralized.

Doc 68, filed July 19, 2022:

My life savings were in Celsius. I trusted Alex. I pray and hope everyday you are doing everything in your power to rightfully return deposits back to customers. I can’t tell my wife and kids our retirement and dreams have been stolen from us. Life is stale, we need updates and silence is not the answer. Please I request you to help put the interest of unsecured creditors, or as Alex famously called his “community” first.

Doc 65, filed July 19, 2022:

I am a Celsius customer with a little over $15k worth of deposits that are locked up in Celsius. $15k may not mean a lot to some people, but it is about 65% or my life savings.

Losing all of my savings will have irreparable consequences on the well-being of myself and my family. I am ashamed, humiliated, and quite frankly, disgusted, that I put all my trust into a company that has clearly participated in near fraudulent activity. I will be spending years trying to make back the money I lost.

Doc 64, filed July 19, 2022:

I only have about $3500 (at today’s value as of July 19th). But for me it is a very large amount. It is approximately ½ of my investment portfolio. The only reason I put it there was because I thought Celsius was safe. I was only earning 3-5% on my BTC/ETH, and since ETH when it is staked to ETH2.0 earns about 6-7%, I figured it was fine. The way they (in their weekly AMA’s) explained it, was that the funds were either staked on the net with “safe” options such as ETH2.0 and MATIC. Or that it was lent out with over collateralized loans to individuals/institutions. Instead they took massive risks with them.

Doc 51, filed July 19, 2022:

I share a similar story to many other depositors who have modest amounts of their net worth locked in Celsius. From spending time on various social media forums and groups I have seen the range of devastation this lockup has caused.

I like many others were led astray by Mr. Mashinsky and his lies. We trusted the company was ran in a safe and productive manner because their leader always expressed that. I do not believe these terms of services should be deemed valid. There is zero chance I or others would have become a customer of Celsius if their terrible business practices were disclosed.

Doc 50, filed July 19, 2022:

Like many investors, I have lost a large chunk of my life savings and struggle to live daily with devastation and extreme stress of watching on the sideline feeling powerless over my money, which I entrusted with Celsius to manage. Alex Mashinsky and Celsius Management have been engaging in deceptive marketing of their platform and products using catchy phrases such as “Unbank yourself” and “Banks are not your friends” to imply that leaving funds with Celsius is just like depositing funds on savings accounts with traditional banks, if not superior.

Celsius customer base extends beyond the United States and its impacts are far‐reaching and impacting the lives of Non‐US resident depositors like myself.

Doc 47, filed July 15, 2022:

This has ruined people beyond comprehension: please peruse r/CelsiusNetwork should you have a human interest in what is happening with people who are not as sophisticated as yourself even. The marketing lies, the deceit, and the lack of accountability will be paid in blood by many.

This person preyed on fears of losing money during the next economic downturn and lied about how our money/assets were managed.

Molly White

Video: The charges against Binance

History

Binance’s locus of operations

Binance growth

“Compliance”

Level 1 accounts

Failure to identify US-based customers

Failure to identify customers in sanctioned locations

Criminal activity

Tai Chi entity

Establishment of Binance US

Keeping US customers on the exchange

Merit Peak, Sigma Chain

Complaints

The charges

Why

Charge details

What’s next for Binance

For CZ

Annotated: Sam Bankman-Fried’s “FTX Pre-Mortem Overview”

Livetweets of the December 14, 2022 Senate Banking Committee hearing on FTX

Livetweets of the December 13, 2022 House Financial Services Committee hearing on FTX

Is web3 bullshit? (Transcript)

Blockchain solutionism (Lecture transcript)

Questions and answers

Is crypto over? It seems like there hasn’t been as much appetite for it lately.

Are there any good uses for blockchains?

What do you think would be some ways to improve the web today, if not crypto and “web3”?

It seems like the web3 movement has taken on some of the language of other attempts to improve the web, such as around “decentralization”.

Where can I find the project you shared screenshots of?

If technology can’t solve societal problems, what should be the role of software engineers going forward?

Announcing the Whitespace newsletter and a Patreon

Statement to the Financial Stability Oversight Council: Regulating digital assets

Excerpts from letters to the judge in the Voyager Digital bankruptcy case

Contents

Background

Excerpts

Excerpts from letters to the judge in the Celsius Network bankruptcy case

Contents

Background

Excerpts