A leaked audio file suggests that Celsius Network is resorting to crypto IOU tokens as a way to pay back customers.
Celsius Network may be considering a plan to turn its debt into crypto IOU “I Owe You” tokens. In a leaked audio file, Nuke Goldstein, the co-founder and chief technology officer of the bankrupt firm, hinted at this financial recourse. According to Goldstein, who appeared to be speaking at an internal Celsius meeting, the company is exploring the issuance of wrapped tokens representing the debt to customers. This constitutes wrapping the Bitcoin (BTC), Ether (ETH), and USD Coin (USDC) owed to customers into a token that represents Celsius’ debt. Or as Goldstein put it, “represents the ratio between how much we really owe and how much we really have.”
Customers of the Celsius Network will then be able to redeem the IOU tokens at an undisclosed time. Furthermore, customers will also be able to trade the IOU tokens on the open market or hold them in anticipation of a potentially long-term Celsius recovery.
In another leaked call, shared by the same source, Celsius executives intimated employees at a meeting earlier in the month on details regarding the IOU plan. According to these executives, Celsius’ CEO Alex Mashinsky had already shared the plan regarding IOU issuance with the unsecured creditors committee. Celsius’ executives further stated that the unsecured creditors committee reacted with “positive feedback.”
Emphasizing the importance of Celsius’ proposed IOU scheme as a valid financial recourse, chief compliance officer Oren Blonstein, told employees:
“This is really how we resolve this, how we get out. What we do in this pivotal moment can be through unprecedented, really innovative solutions and this [plan] is one of them.”
Celsius Network IOU Scheme Follows Familiar Trend
Celsius likely views this IOU strategy as a good way to shed the debt it owes numerous customers. This is because according to speculations, Celsius would still have a $1.2 billion deficit even after selling all its assets.
Earlier in the month, Poolin, one of the largest BTC mining pools, suspended withdrawals from its wallet service. However, a week later, the liquidity-strapped Chinese mining pool operator announced the issuance of IOU tokens to affected customers. This represents a 1:1 ratio of user balances across six digital currencies.
Another instance of debt token issuance is Bitfinex’s recovery plan back in 2016. The crypto exchange lost 120,000 Bitcoins from its reserves to a hack at the time. As a form of damage control, Bitfinex issued debt tokens to affected customers. These customers could then trade them on the open market, but for way less than their face value. Eventually, Bitfinex bought back all of its remaining debt tokens in April 2017. At the time, the crypto company expressed gratitude for its community’s patience and relentless support, saying:
“We are tremendously grateful to all of our customers and new shareholders for helping us get to this point.”
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