Big-name cryptocurrency lending companies like Celsius Network and Voyager Digital also offered bank-like accounts that pay interest rates far higher than traditional lenders. These companies even marketed themselves as allegedly having safeguards that are meant to protect depositors from the price swings common in the crypto world.
But following the nosedive in the value of bitcoin and ethereum, crypto companies told their clients that they are freezing withdrawals and transfers, preventing thousands of Americans from accessing billions of dollars worth of assets stored in the networks of these companies and plunging many of them close to poverty. (Related: Cryptocurrency lending company Vauld suspending withdrawals, transactions and deposits as crypto market crash takes its toll.)
One of the people who fell victim to the collapse of the crypto industry is Lucas Holcomb, who one night told his pregnant wife that they just lost around $100,000 due to the crash.
Holcomb had taken out a home-equity line of credit and deposited the proceeds to Celsius Network. He expected to make an extra $7,000 a year by keeping cryptocurrency assets with Celsius, but when the company announced that it was freezing all assets, his family's money was trapped. Holcomb's attempts to withdraw his funds were unsuccessful.
He was able to pay back the home-equity line by tapping into his cash savings. "My family's not going to starve to death," he said. "But losing $100,000 is never fun."
Holcomb's story is unfortunately not unique, and in the days following the announcements of most big-name cryptocurrency companies that they will be holding on to the assets of their clients, thousands of users have come out begging to just get their funds back.
Clients of Celsius Network have banded together, writing dozens of letters to the Bankruptcy Court for the Southern District of New York, hoping to get their funds back. This court is where the Celsius Network filed for bankruptcy.
Before it froze all assets, Celsius said it had more than 1.7 million users in June. In letters to the bankruptcy court, many of these customers said they felt lied to by the company and by CEO Alex Mashinsky.
Mashinsky regularly went to social media to host question and answer sessions with the company's customers and other potential clients. Brian Kaspar, one of the platform's customers, said Mashinsky "continued to tell people they were better than a bank – safer, with better returns – as well as tell us they had billions in liquid cash."
"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," said Stephen Richardson, who has been a Celsius customer since 2019 in a letter to the court. Richardson had more than six figures worth of crypto assets on the platform that he is still unable to access.
"I am embarrassed, ashamed and disgusted by the utter lack of transparency from a company that claims to be an 'open book' and highly transparent compared to any and all banks," Richardson further wrote.
Flori Ohm, a single mother of two daughters headed to college next year, wrote in another letter that her entire family's financial and mental health has been severely impacted by the lock-up of their crypto assets.
"I can't focus [on] my job or sleep," she wrote. "I have supported my parents and my daughters by myself for [my] whole life. I am struggling hard [to make a] living."
Stephen Bravler, another customer, said he has less than $1,000 left in his checking account to support his family following Celsius' freezing of withdrawals. Bravler called for his funds to be released immediately, saying that "this is an emergency situation, simply to keep a roof over my family and food on their table."
In a recent presentation, Celsius noted that it intends to give customers the option "at the customers' election, to recover either cash at a discount or remain 'long' crypto in the hopes that, by keeping their assets in crypto and with the company, the market could recover enough for customers to get their money back.
CryptoCult.news has more stories about the crash of the crypto industry.
Watch this episode of the "Health Ranger Report" as Mike Adams, the Health Ranger, talks about how the media is whipping up fear about unregulated crypto so that the government can criminalize non-government-backed crypto operations.