Over half a million people who deposited cash with collapsed crypto lender Celsius Network have been dealt a major blow to their hopes of recovering their funds, with the judge in the company’s bankruptcy case ruling that the money belongs to Celsius and not to the depositors.
Judge, Martin Glenn, found that Celsius’s terms of use – the lengthy contracts that many websites publish but few consumers read – meant “the cryptocurrency assets became Celsius’s property”.
The ruling underscores the Wild West nature of the unregulated crypto industry. On January 5, 2023, New York attorney general Letitia James moved to impose a kind of order, or at least legal repercussions, on Celsius founder Alex Mashinsky, whom she accused of defrauding hundreds of thousands of consumers.
Crypto’s fortunes have plummeted in recent months since Celsius became the first major crypto platform to implode last year, its bankruptcy in July freezing at least US$4.2 billion for 600,000 Americans, according to court papers, and foreshadowing the collapse of FTX four months later.
The collapse of FTX and the subsequent bankruptcies revealed that what may have started as a kernel of a sincere libertarian idea to stand up to endless money printing and debt creation in our financial system, has been hijacked by what appears to be an immutable flaw of the human condition: our greed and desire to get rich fast.
The cryptocurrency world transformed into an even more corrupt and even more leveraged system than the one it was attempting to replace. Theft committed by thousands of cryptocurrencies and NFT creators made Wall Street, which society loves to hate, look like a group of nuns, as the crypto gang stole money from the public in broad daylight.
With every market bubble, we are reminded that there is nothing new under the sun. The most recent iteration has been helped to swell by technology and social media, which just expedited the ascent and widened the reach of its perpetrators.
Sam Bankman-Fried (SBF), a 30-year-old nobody, makes Bernie Madoff, the disgraced money manager who perpetrated the biggest Ponzi scheme ever, look like an amateur. What took Bernie Madoff decades, SBF accomplished in just a handful of years.
Crypto has been touted as a decentralized, grass-roots alternative to the centralized, overregulated government-run system that was up to its ears in endless quantitative easing and money printing. Though the crypto ledger (the database) is decentralized, unless you are going to store the digital key that unlocks your digital treasure on a USB stick and risk losing it, you’ll have to rely on exchanges and digital wallets that are unregulated, expensive to use, and have proven to be a significant point of weakness.
As we look through the ruins of the crypto collapse, it is noticed that the crypto tulip market is nothing more than a giant, unregulated, leveraged casino, whose real purpose is not to improve the world or deliver the technology of the future but to enrich its creators and provide degenerate gamblers with another exciting way to speculate and jump on a get-rich-quick opportunity disguised as investing. This is the entire reason for the existence of the crypto world.
Unfortunately, many everyday people were infatuated by the prospect of getting rich fast, and predictably lost their life savings. Some venture capitalists will lose other people’s money and their own reputations. The crypto decline will reduce the demand for microchips that were used to produce crypto garbage, as well as demand for the digital advertising that was used to spread the lie. There will be some other second- and third-order effects that will become obvious in hindsight. The collapse of FTX may have been a “Lehman moment” for the crypto universe, but it is unlikely to have a significant impact on our financial system. It will spill into the real world, but only on the margins.
