‘DON’T GO BANK’: Drew Niv Warns Crypto Firms After Celsius Chapter 11
“…By 2025, lawyers on all sides will be feasting on estate money.”
Celsius Network has filed for bankruptcy after a hellish month for the crypto lender and its management team led by Alex Mashinsky. Read more about how Celsius became deeply insolvent here.
Vermont’s financial watchdog, DFR, announced that Celsius has commenced voluntary Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of New York.
The trading industry is closely watching how Celsius handles its solvency issues, as the company is unlikely to be the last in the digital asset space to face such hurdles.
Each decision at this point is difficult, with pros and cons, and Celsius chose to file for Chapter 11. There are arguments against this decision, however.
FX industry dinosaur Drew Niv, who co-founded FXCM and is now an investor/executive at TradingTools, has come forward to share his knowledge and advise struggling crypto firms not to file for bankruptcy.
“A bit of unsolicited peanut gallery advice for struggling crypto businesses. DO NOT declare bankruptcy, enter into a deal, even a deal that wipes out all shareholders, etc. Bankruptcy will take years to materialize, meaning customers waiting for their money will be waiting until 2025 to get pennies out of it. The reason it will be pennies is because by 2025 lawyers on all sides will be feasting on estate money.
“Times like these are a bankruptcy lawyer’s dream come true and in major bankruptcies like these years charges will steal over 20% of the funds from the estate without making a logical, sensible decision. The fact that the status of crypto and customer money is not really being tested in court could make this a 2028 affair.
“If you think I’m exaggerating, look at the high profile financial bankruptcies. Lehman Brothers took nearly 14 years to resolve Refco which is more travel/celsius sized and others took 5 years for customers to recover their money (21 cents on the dollar for FX retail clients) Distressed deals are always predatory I’ve been on both sides so I’m an expert, take the deal and move on, your days in as long as founders/leaders are done, start over.
Drew Niv’s FXCM faced its own nightmare after the Swiss peg flash crash in January 2015. The broker was banned from the United States and its former parent company, Global Brokerage, Inc. filed for bankruptcy on 11 December 2017, entry into force in February. 2018.
Global Brokerage shareholders have lost more than 98% of their investment since January 2015 and the FXCM group is now owned by Jefferies through its subsidiary Leucadia.
FXCM was banned from the US and sold its 40,000 US client accounts to Gain Capital (now part of the StoneX group) for around $375 each.