Just two weeks later Appearing in an Ask Me Anything (AMA) request with Celsius founder Alex Mashinsky, crypto Youtuber Ben Armstrong announced that he intends to file a class action lawsuit against the lending platform and its chief executive.
Armstrong made legal threats via Twitter on June 15, and has since provided more details in several threads. His publish focuses on being unable to repay loans with existing funds on the platform and having to deposit new funds to repay loans:
“[Our account rep] told us we had enough money in our account to pay off a loan. But we cannot use the money in our account. WE NEED TO SEND MORE MONEY TO CELSIUS TO REFUND IT.
“Imagine an insolvent business you can’t get your money out of ASKING YOU TO SEND IT MORE MONEY,” he added.
Armstrong said he is currently working on the process of obtaining all “disclosures, documents, loan details, etc.” while talking to lawyers to explore the best ways to approach the class action. The co-plaintiffs have not yet been added because Armstrong has not yet “officially started moving”.
BitBoy Crypto is the second most subscribed crypto YouTube account with around 1.45 million subscribers and mainly provides commentary on market news/events. The chain is only behind Coin Bureau and its 2.07 million subscribers, although BitBoy Crypto also has many detractors, some of them allege that he has been paid to promote dubious crypto assets in the past.
Armstrong’s feelings for Celsius changed dramatically just two weeks ago, when he was Featured during the “Ask Me Anything” (AMA) session with Mashinsky on Celsius’ YouTube channel.
“And today, I am the victim. Kicking me for wondering how I let it get so bad and so far,” he said.
Celsius is either battling insolvency or experiencing severe liquidity issues as a result of the crypto market crash. The company suspended withdrawals on June 13 and also reportedly moved about $320 million in assets to repay loans and avoid liquidation on decentralized finance (DeFi) platforms such as AAVE.
However, one problem with a potential lawsuit is that if Celsius files a lawsuit bankruptcy this will trigger a provision called an “automatic stay”, which would prevent creditors from pursuing collection activity against the company.
Celsius reportedly hired restructuring lawyers from Akin Gump Strauss Hauer & Feld to find potential solutions to its financial problems, but Armstrong says these types of lawyers “specialize PRIMARILY in preparing companies for bankruptcy.”
“Even if Celsius files for bankruptcy, we have discovered potential workarounds to continue pursuing a class action lawsuit (unaffected by bankruptcy). Unfortunately, I have to keep this one close to the vest for now,” he said.
Related: DeFi contagion fears and Celsius and 3AC insolvency rumors could weigh on NEXO price
In terms of recovering funds from Celsius, at least there seems to be a potential option for users with less than $25,000 on the platform to get their assets back in the immediate future. Joshua Browder, the founder of robo-attorney DoNotPay tweeted a step-by-step strategy on June 15 on how users could recover funds:
“At this time, these exchanges have not yet filed for bankruptcy. Therefore, they are subject to Small Claims Court judgments. Cases in Small Claims Court usually take 1-2 months. As long as it lasts longer than that, this strategy will work.
2. To file a small claims suit, the first step is to send a demand letter.
The demand letter should state 1) the amount you are owed 2) why you believe the money is owed to you.
For Celsius in particular, you must send it by post (acknowledgment of receipt requested) to:
—Joshua Browder (@jbrowder1) June 15, 2022