Crypto

Turning your debt into a new cryptocurrency – Reuters

Ever since bankrupt crypto lender Celsius froze withdrawals in June, customer funds have been in limbo. Now, a leaked audio shared with CNBC reveals a tentative plan to compensate them.

The company wants to issue IOU cryptocurrency to customers who have signed up for some of its accounts.

The entry was provided by Tiffany Fong, who says she is one of the 500,000 Celsius customers whose funds are locked up on the platform. Fong says she received the audio from a self-identified employee who remained anonymous during their interaction.

CNBC was unable to confirm that the leaked audio is the entire conversation from the Sept. 1 internal meeting. However, CNBC spoke to former employees who confirmed the authenticity of the recording. In the audio, CTO Guillermo Bodnar says the plan is in its “initial stages.” What is presented may have changed in the weeks following the call.

In the entry, Celsius co-founder Nuke Goldstein describes a compensation plan for clients who have deposited assets into Earn’s Celsius account, for whom Celsius promised returns of up to 17%.

Goldstein said Celsius will issue “wrapped tokens” that will serve as IOUs for customers. Tokens represent the ratio of what Celsius owes customers to the assets they have. He said that if customers wait to redeem their tokens, there is a better chance that the gap between what Celsius has and what it owes will be smaller.

It’s a risky bet to increase the value of a young token from a company that just went bankrupt. Goldstein said the value is likely to rise as Celsius generates revenue from its mining business, staking ETH and other coins that could become liquid.

According to Goldstein, Celsius also intends to allow clients to trade these tokens. He said the tokens could be traded on Celsius, likely for less than what they are owed, or on crypto platforms like Uniswap, allowing the market to determine the value of the tokens.

In this photo illustration, the Celsius Network logo is displayed on a smartphone screen next to the Bitcoin cryptocurrency.

Rafael Enrique | SOPA images | Light flash | Getty Images

Reimbursement isn’t the only plan Celsius is developing. In a portion of the recording shared exclusively with CNBC, Bodnar said the company is also building a transaction management system that is designed to keep track of the company’s blockchain assets. This includes assets, the price at which they were purchased and their value at the time of sale.

Celsius, which has said it manages billions of dollars of client assets, has never had sophisticated software to properly manage and track its assets, sources close to the company say. Those sources, who asked not to be identified for privacy reasons, also said the data was manually tracked in a simple Excel spreadsheet.

During the telephone conversation, Bodnar said that the goal of implementing this new system is transparency.

“…[T]transparency is reflected not only in how we communicate, but also in ensuring that everything that is done on our platform is traceable, auditable, end-to-end – we have nothing to hide,” he said.

Goldstein also pointed out that a lot of misinformation about the company is circulating on Twitter and that employees should only trust information provided in court documents and municipalities led by CEO Alex Mashinsky.

“If you go to Twitter, take an umbrella with you because it rains bulls there,” Goldstein said. “This is your chance to find out the truth. If we don’t tell you the truth about what we know, we’ll go to jail. Now I don’t know if we’re going to jail… but that’s not good.”

On a Q&A session, one speaker asked how employees are doing with regards to releasing blocked funds from the platform. Goldstein said employees would not be prioritized over customers.

“Employees are not the last and not the first,” Goldstein said. “You are also a client. We are a client. This means that we are at the same level as the customers.”

CNBC reached out to Celsius for comment regarding its repayment plan and the status of its transaction management system, but the company did not respond.

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