Jun 21, 2022 - Economy

Crypto influencer wakes up "with Celsius sweats"

Photo illustration of Ben Armstrong and the Celsius logo surrounded by geometric shapes

Photo illustration: Sarah Grillo/Axios. Photo courtesy Ben Armstrong

Ben Armstrong, aka "BitBoy Crypto," is a YouTube influencer who has taken payment to promote crypto. Everyone knows this, and he does not deny it. But what has him riled up lately is something he's both publicly endorsed and used as a customer.

That something is the crypto lender Celsius.

  • We dig into his gripes, because even a huckster can shed light on a volatile situation.
  • "Our money has been mismanaged," Armstrong tells Axios.

What's happening: Armstrong whipped up a tweet storm to complain about Celsius after the platform suspended withdrawals, among other services. We discussed Celsius' halt last week.

  • Since that halt, Celsius has yet to resume transactions, though the embattled crypto lender posted a statement Monday, saying stabilizing operations is a "process that will take time."
  • Celsius did not immediately respond to Axios' request for comment Tuesday.

Armstrong's grievance with Celsius stems from a pair of crypto-collateralized loans, denominated in bitcoin and ethereum (ETH), which he took out using the platform.

  • "Tuesday night my business partner says, 'We need to talk about the ETH loan. We can’t use the money in our account, because it's frozen,'" Armstrong tells Axios.
  • With markets roiled and crypto values plunging, debtors are being asked to top up their accounts or risk having their assets seized and their accounts closed out by lenders.
  • "I’m waking up with Celsius sweats," Armstrong told Axios in the days leading up to eventual liquidation of his ETH loan. "I'm thinking, 'By the time you open your eyes, you’re going to get liquidated.'"
  • Armstrong says his account totaled roughly $3 million before the liquidation.

One thing Armstrong could have done, he says, was use coins he had in his account to address his ETH loan. But first he'd have needed to convert them into coins of the loan denomination.

  • And because Celsius had suspended swaps and transfers, the only way he could address a margin call was to send the lender more money, Armstrong said.
  • "Whether you are able to internally pay the loan-to-value or naive enough to send more money in, you’re probably never gonna get your money back," he said.
  • Armstrong plans on suing Celsius, but has dropped the idea of leading a class-action lawsuit against the firm.

Big picture: For some, the multi-billion-dollar question is whether Celsius will file for bankruptcy — and if it does, what type of bankruptcy proceeding it'll pursue. That's according to Robert Honeywell, bankruptcy partner at K&L Gates.

  • The type of bankruptcy proceeding would be determined by what the business is, which is ill-defined in an industry that remains unregulated.

Context: Celsius reportedly hired restructuring attorneys last week.

  • "You’re a stockbroker, a commodity trader, a banker or an insurer. If you’re not one of those, you’re everything else," Honeywell quipped.

The intrigue: "The customer wants that crypto account balance to get priority treatment," Honeywell said. But priority treatment only goes to those in specialized cases — for example, when a customer holds a securities account.

  • "We also have a strange situation where some crypto companies might be deemed to be offering securities, but others deemed currency," Honeywell added.

Bottom line: "Not your keys, not your coins" is the lesson for Celsius customers. It's better to hold your coins in your own wallet, rather than an exchange or platform.

Go deeper