Simon Dixon - first day hearing summary
10:10PM Jul 18, 2022
work. We need every single disclosure. And then when we handed documents over to our dealer to try and progress there was just a will will disclose was in the public. But was there no if you're doing a securities offering Castlereagh it was meant to be a 750 million round is disclosed as a 600 million round even though there was a press release 750
Yeah and regulatory disclosures the attorney for the series B holders think his name was Mr. Dunn. He talked about how the 700 million that was raised was supposed to be used for the purchase of the GA facility of Israel and for Bitcoin mining and a few other things. And the question that he had on behalf of the series eight folks was that when it came time to you know, disclosure of how money is being spent and these expenses and inter entity expenses and bills being paid, was are these is this money actually going? Where it was represented that it was supposed to go? So there was a call not only from the judge and the trustee, but also from Mr. Dawn on behalf of Series A, really for a significant amount of transparency that just doesn't appear to be there. And I think that was the theme through multiple issues today when Celsius was basically asking the judge for money to carry on its operations. There was definitely a theme from the trustee that said, you know, we we'd be happy to look at this but we sure would have liked all heck of a lot more disclosure prior to today. And the judge agreed with that He admonished Celsius and said, you know, you need to be working with the trustee and giving these types of disclosures moving forward, and so it's kind of nice to see. Judge Glen hold Celsius to the fire a bit, you know, I mean, it seemed clear that the judge was more than willing to give the assets to Celsius to continue as an ongoing concern. But there's a process there in it. You know, Celsius really needs to disclose and work with the trustee to make sure everything is is aboveboard
data back to this money that they now have to ask before on the trustee reviews, where is this money? Is this like clients money that they can now start funding for operations, which is people are going to get lost back? Is this money in the form of Bitcoin holdings? Is it in what form
excellent question and and and that was touched on as well? In that, there were a few times where? Yep, all right. So let me back up a second. One of the issues that came up was, who is going to be the right entity or location for housing and storing and taking custody of cryptocurrency assets during the bankruptcy? And one of the questions right, sure.
The last thing I want,
right, so one of the questions that was asked was whether or not you know, the US Bankruptcy Code had any type of provision for how to store assets and how to handle cryptocurrency assets and whether or not you know, the trustee was capable of doing that. And, you know, in the back of my mind, tone I was sitting there thinking, well, there are several agencies within the US government that are very skilled at holding Bitcoin, right? If we think about Silk Road, that they took it, they held it and then they auctioned it off, right? I mean, there's somebody in the government
that knows how to use a Bitcoin wallet.
Yes. Yeah. And yet And yet three federal agents skimmed off without and went to prison right.
I'm not saying that they didn't put somebody in there. I mean, maybe they need you guys to get one of these guys out of prison to be able to hold on to this stuff but but the the the laughable concept, that there's nobody in the US government, that is somehow capable to be able to hold and account for cryptocurrency assets, I thought was a little interesting. Instead Celsius proposed and this was a little off the cuff, but they propose that the court approved GK eight to hold their cryptocurrency oh wait a minute, you want one of your sub entities what? What are the people that you're actually fighting for? To avoid bankruptcy liquidation? You want that entity to hold all the assets of celcius Corp? Does nobody see the conflict of interest here and how ridiculous this request is? But nonetheless, it was brought up. But a
was was was allocation or is it just all done through lawyers?
It was all done to lawyers. Alex was in a in a very, what I would have said he was in a very stoic and very neutral room. If I was prepping Alex for litigation, I would have said you're not going to move you're not going to make a facial expression. To the extent that you are appearing live on camera it should look like it's a photograph of you in the most non offensive place on the planet and they pulled that off. So So kudos for celcius attorneys for making Alex look like a statue and I'm not trying to be derogatory. But but they did a good job of presenting it.
Yeah, that was actually incredible because if anyone here has had any interaction with dogs machines, he cannot
shut the hell up. Right so he did a good job of being stuck now. Celsius as attorneys that Nash came on and one you know, the first thing that they admitted was that they knew nothing about cryptocurrency other than what they had learned in the last few days. And so that that really didn't bring a lot of confidence in that they were reading you know, prepared statements, obviously from celsius, about how things work and when one of the attorneys tried to explain how keys work. I just, I I think the comment that I made in Celsius chapter 11 ideas group on telegram was a it was just painful to watch this and I felt bad for the attorney sitting there trying to explain to a judge how public and private keys work and and I think it's at these times where you know, having an experienced lawyer or representative that that really knows how this stuff works on your team can be of some benefit. But back to your question about how are these expenses is being paid out. Before we hit that jump off point. It was assured that all expenses for bills, salaries, what have you are all going to be paid in US dollars. And so the assumption is that those US dollar funds are coming out of Celsius bank account somewhere in the United States but that was not disclosed.
On the balance sheet operations
it may be that I can't speak to it. I haven't seen where the source of funds is that it's being used to pay for these expenses being paid for their attorneys and what have you. But that's their one of the interesting side issues that came up with stretto which is the notifications website. I know a lot of people have been going straight over to get the filings and they subscribe to notifications. And one of the motions was to approve stuff out of us are spread out to be the official notification company for the bankruptcy. I think they're also doing it for Voyager. And the judge pushed back and said you know you there's this potential conflict of interest with a company called exclaim, where exclaim may or may not be paying referral fees, to stretto for bankruptcy claims to be purchased. And the judge wanted more disclosure on that and that became sort of like I said, the theme of the day was, you know, they really want more information to see how the interoperations of everything is working. And quite honestly, I would have thought that a lot of that would have been thought through in the month leading up to the bankruptcy filing of how much disclosure is going to be meted, but to Celsius as attorneys credit. They seem to work right up to the edge of not disclosing as much as they could and still get sort of the protections that they needed at this point. And that that is a legitimate strategy to try to. You know, withhold as much as you can and still get the job done. On that note, there was a motion to continue or at least have some form of protective order for listing certain creditors and debtors names within the filings. I think we all took note that of the 50 top creditors, I think at least 40 of them or approximately 40 of them that were listed as being on file and Celsius requested an order ceiling that information and information similar to that, claiming that there were certain death threats and certain safety concerns that needed to be put forth. And while the judge approved it on the interim basis, it's on an interim basis only because there needs to be at least some form of information disseminated to the people that are concerned or to people that are a part of the case of who the actual folks are involved with. And so I anticipate some form of procedure, whether that's done under seal with release for attorneys eyes only or what have you, but that information will get at a minimum to the creditors community committee at some point
we're gonna wrestle confusing right like if Celsius is getting death threats. Why are they keeping it under seal shouldn't be shouldn't be the opposite situation? Well, I guess is more confused here.
I'm not saying I agree with restate.
What I'm saying is that they use that as justification to continue and
without the judge going too far into it or asking.
They were basically like nine, nine counterparties
yet while they were saying that, yeah, they were saying that there were threats and Voyager but they were also saying that those same threats existed within Celsius. They didn't they didn't offer any affidavits or any evidence of it at the time. And I think procedurally, it was fine for the judge to order it on the interim basis to allow for that seal to happen. But he was very clear. That he wanted a hearing on that. If and taken. He wanted the creditors committee to be able to have a say on whether or not the records were going to be held. And again, that's that's what impressed me about Judge gladden is that he was very adamant that on certain due process things certain motions or certain relief, he wasn't going to side on a permanent basis without having all concerned parties be involved. So I think for the Celsius community, the message should be I think the case is in very good hands with Judge Glen and I think that's that's kind of the takeaway from today. I think a few other things, you know, being disclosed the Bitcoin mining facility in Texas. You know, they're asking for 3.7 ish million dollars to finish out the bill. In order to get the mining rigs in there. Apparently they need to pay $1.5 million in duties to customers to have those machines released, to be able to use them. So you're looking at nearly $5 million to maybe get that mining facility. Back up and running.
That sounds like a disaster waiting to happen.
Also of note, just before the hearing today, the Texas securities regulators Department made an appearance on the record in the case which which I thought was interesting is I'm in Texas and I know there's a lot of things going on in Texas they were subjected to as he sent a cease and desist order before and of note was the mentioned by Celsius as attorneys when looking for modification to the global stay statement. They said that they had been contacted earlier. I think it was this morning, either this morning or Friday morning and I apologize for not committing into memory. They were contacted by the SEC about certain issues and so they want to stay in protective order to be very clear that regulatory agencies automatically get their hands on assets. So it was definitely a lot of fireworks for you know on that realm of just kind of, you know, popcorn eating type type events from from a presentation standpoint, I thought Celsius is attorneys rather clunky and unprepared. I thought they could have done a better job of using their assets. I think they use five or six different attorneys to make their motions today. I don't want to large firm it's sort of customary to put your new young lawyers on this type of a filing or this type of motion because there's relatively low risk of being denied relatively no risk of a young attorney who may have their feelings hurt by being shot down by a federal judge suffering that type of embarrassment but I thought that it made the presentation rather disjointed by having multiple attorneys present these motions, when it would have been a lot smoother and a lot easier to transition to have one competent lawyer roll through the entire thing. In fact, the judge asked a very specific question about what was going to happen with certain custody wallets. And Mr. Nash said well, we'll we'll address that later. When we get to that motion and from a litigation standpoint, that's a that's a failure. When a judge is curious about something that's when you address it right then and there and you respond to that. So I talked this from that presentation standpoint, we could have done better on to custody accounts because I know that's that's a topic of interest for a lot of folks. So if he is represented that of the assets that are out there, only 4% of them are custody accounts. And then the judge asked a very pointed question as to the trustee. I think it came more from the trustee and the judge back that up by saying that the custody accounts, which you know, these are loans that have been paid, and then they go into custody accounts are those assets of the of the user, or are they assets of Celsius? Right. And this is a key question because if they're assets of the user, they shouldn't be in the bankruptcy proceeding because they're not Celsius assets. And Celsius is attorney sort of punted and said, you know, Judge, this is going to be a question of law for you to decide, because admittedly, the 4% of these assets that are in custody accounts are commingled. So they admitted.
If you look at the background, so you know, it was a regulatory strategy with the SEC. Again, I'm just saying what I what I know from the public records, and but the SEC contacts and Plan C maybe knows a bit more about this as well. The SEC contacted them their strategy was to say, All right, okay, with accredited investors, you can continue to earn non accredited. We're going to call it a brand new service called customers and that's when I released a video explaining the regulatory issues on my YouTube channel. And then yeah, so just calling it custody. Doesn't mean you're authorized to be able to do it for a start and then second. If all those assets have been invested, to me, it just sounded like a database entry where they just said these accounts is this is what we owe these people. And were they actually transferred to like a GK account or something like that, if that if that was the case. Normal accounting practices would mean that that will be a note in the in the balance sheet because it's no longer your assets. But they've included them in the balance sheet, it seems so they will probably defy contracts, which means not custody for them they were using. Money that was held meant to be held in custody and custody is meant to be somebody else's money that goes for him and they they tell you what to do with it. Right.
Well, yeah, so you know, generally speaking, one of the big no no's from a securities regulatory standpoint, is when a regulator takes a look at what you're doing with people's funds. And if you're holding somebody's money in custody, right, where you're responsible for it. One of the big no no's is commingling of assets.
Yep, that's what I was gonna go I do if what you said is actually true. They just opened themselves up to like three more elements of fraud through the SEC.
Well, so whether it's true or not, doesn't matter. Their attorney admitted on the record that they were combing, right so they would have to do a lot of work to to roll that back. And I think one of the themes from Celsius as attorneys today was very clear. They said, you know, judged, you know, how things were done before with Celsius or not how they are moving forward. They tried to make that very clear, distinguishing statements, whether or not it's a fact I don't know that remains to be seen, but they were very clear in their statements, claiming that their business practices running Celsius moving forward through bankruptcy and potentially after are not going to be the same as kind of the Wild West that Celsius was doing and leveraging and over leveraging and then leveraging upon leverage accounts that they were doing before. You know, and that was there's only so many times you can say it before, you know, when you're saying it, you have to wonder if you actually believe in yourself, and I got that impression from Celsius. Now, on that tone. I know you'll you'll appreciate this and we talked about this on the law review show the other day. Is that statements made to a bankruptcy court. I think David Silva brought this up when you're making statements to a bankruptcy court, a false statement to a bankruptcy court. Isn't your normal perjury type scenarios criminal defense at that point, and if it's bad enough, it can be grounds under certain circumstances, but just dismissing the bankruptcy altogether and saying you don't get our protections because you lied to us. So at the beginning of the motions Celsius, his attorneys offered Robert companion's affidavit, declaration, whatever it was that was filed, and he was the attorney before the attorneys that they have now that was looking at restructuring. They offered his affidavit on the running of the business and how things were in support of their motions. interim until the 341 meeting is held in about a month or so. The judge then said and this was hilarious. The judge said okay, you're offering companions affidavit right? It's admitted. Do you want to offer Mr. Mishin skis because I see in the docket and I'm paraphrasing here, as I see in the docket that Mr. miszewski offered this declaration, as well, do you offer that? And Celsius attorney said you know, no, not not at this time. I don't think we need it. It was just more for the background. Things along those lines and the judge said well, that's interesting because I've read Mr. Machines keys declaration like three times now and I still don't you said I read it three times, and I still don't understand it. Now, look, Judge Glen is an incredibly brilliant man. Right Columbia Law. He is the chief judge of the Bankruptcy Court for the Southern District of New
York breaking up, Jay.
I'm sorry. How's that? That better? That's good. Yeah. Yeah. So anyway, the zinger the day was when Judge Glen said that he couldn't understand machine skis declaration after reading it three times. And you know, my gut was telling me the reason that Celsius was not offering machine skis declaration as part of evidence and there may be claims for material omissions, or maybe even downright you know, falsehoods in that declaration that they really don't want to get into. I don't know that for a fact. But there should have been no reason that they didn't offer his declaration in support of emotions when they had done it on the record. Does that make sense?
So Jason, what's the what's the next step?
So I believe at the end, they set the next hearing date for August 8. In between then and now. The US trustees office is still accepting applications for creditors committee, although trustee Shara Coronel she's the trial attorney for the trustees office that was handling the case today said that they'd had an a very large response to requests to serve on the committee and anticipated in these worker words a robust process for selection of committee members. After the committee is formed, and obviously the committee needs to form its bylaws, maybe make a constitution select Council.
Can you Can you back up, what kind of committee or what am I missing here just like anyone can apply for this. What kind of committee are we talking about?
So we're talking about the creditors committee, that usually formed in chapter 11, which is a form of due process the committee is supposed to represent all of the creditors in the bankruptcy so that the creditors have a voice. So it's sort of a representative form of government.
is there a specific number of people on the committee do you have to be you have to have lost X amount of money to be part of it? Like what are the like, prerequisites to be on the committee?
So the United States trustees office has, you know, a process for selecting committee members? I don't know what the secret sauce is, but one you have to have some form of standing right you have to you have to be a creditor in order to be a part of it. And more often than not, they they tend to choose people who have lost more. You know, if you've lost $100, the chance of you being on the committee is pretty low. I'll just put it up put it that way. Think about
it like Simon you're going to get on this.
So yeah, I will be
if they release the top 50 accounts or disclose now I'll be one of those people. But I our advice our advisors are saying that if I join the committee, then my chances of submitting a recovery plan and not having a conflict of interest will be compromised. So I believe that the best that I can offer to this is not being in the committee and actually giving a recovery plan. I know services and requests requested there 120 days Excuse me. But there's various there's various strategies employed and different in different areas. That may change. But I if I were not submitting an alternative recovery, then I would join the committee but I can't do both.
And, and that's fair. And you know, there's more than one way to participate or to have a say, you know, for example, there's 1112 members in the Celsius chapter 11 ideas group, you know, and it was a pretty active room in there and there's some folks with some great ideas. They may not even be affected by Celsius. I think there's a few discord groups, there's Twitter groups, there's places where people are congregating and finding a way and whether you can serve on a committee or not. The judge address this because over the weekend, he received an email directly and the judge commented, I have no idea how this person got my direct email in the back of my mind. I'm thinking judge, this is the crypto community they they probably know what you had for breakfast, right? So anyway, somebody emailed me
go to details from
Jacqueline. So they emailed him directly, and the judge said that he'd be putting that email on the docket and I think that he did, but one of the things that he directed Nash to do, which is Celsius as attorneys said in lieu of the creditors committee being set up, he told him that mash Celsius celcius attorney that they needed to set up some form of email address within their firm to address creditor concerns. Because there are people that are mad and they need a place to say that they're mad and they need a place for people to have their voice heard and to be addressed. And without that type of outlet. Just like they're gonna send me these emails and I don't want to write he didn't say that directly. But that was that was the point that I thought about what the judge was saying. I said, that's perfect. You may not be able to be on the creditors committee. You may not be able to afford a lawyer to do a filing but you know, for those folks that are struggling, it may do some good just to be able to send an email to Celsius, his lawyers and tell them what's going on. I'm not going to disclose any names but while I was doing live updates today, I received a private message from someone that was listening to our show the other day tone and thanked me for the suggestion of seeking counseling that he was very distraught, very depressed, and he he followed that advice and he is getting out. There's more than one way the community can can support each other. It's not it's not just about the dollars at the end of the day, right? Even though that's a big part of it. There's there's a larger thing that's going on here. And the more we try to be human beings, I think the better it's going to
be, ya know those things so Jason Yeah, by the way, everyone that's listening wherever but 50 100 people here. We did do a Bitcoin Law Review Show where we talked about this for over an hour on my YouTube channel just a few days ago, so if anyone goes to my YouTube channel, just scroll down to videos from a few days ago find the Bitcoin law review about Celsius, I think it was the second and the third hour was was the Celsius talk. Also, hey, one more comment. We do have another lawyer litigator in here I joke call us Aries or no Joe, if you were on that call today or not over Celsius, but if you were, I'm sure Simon or Jason will bring you off if you want to have any comments. So if Joe is requesting speaking, you guys may want to go ahead and bring him up. He may have something to say he's a lawyer as well.
See each every
night to make a request if you're here. Okay, I would
What do you want to do then? So I was I'm, I'm gonna try to speak to a few people though. Should
we just wrap it up? I think 10 You're going to schedule another level on Wednesday. Another long
Yeah, we might catch a lot of you probably. After the next hearing. After all the state I got my conference coming up one to six. So around the eighth is when I free up, which is perfect.
Okay, cool. Maybe we'll do a few more spaces but Jason join it Do you want to jump off? You got things to do what you want to take a couple of people.
I'm happy to take a couple of questions just just so long as everyone knows that. You know, this came up in the telegram group signing you and I have zero relationship. I'm not your lawyer. I'm not representing anyone within the celcius community other than I do have one client that I filed an arbitration for. And any of my statements that I'm making now, any of the references that I'm making now have nothing to do with any representation. And any advice that I've given comments that I give, do not rely on this is just this is kind of barstool law. This is these are people having conversations about this. Everybody agrees to that. More than happy to take questions.
Yeah. And just for clarity. Yeah, I haven't. The law firms that I'm using. Bank to the future using are not the same people that were advising spaces that they're working on strategy behind the scenes, the council we've actually engaged you know, I've never engaged Jason in any kind of legal advice or anything like that. And we've just, you know, we just know each other from back in the day from all of the different crypto cases and podcasts and tone stuff.
Get well, you know, from from 2013 to now we've we've crossed paths more than once. So,
yeah, yeah, but I've never I've never sent a Satoshi or a penny or cent data to Jason yet, and we don't have contracts.
That's correct. All right. Let's, let's get a question.
Just a couple of people in so we got Thomas Roseann. Thomas Can you hear us
that's cool. So um, what we were doing the others is just take any disclosures or whether you own tokens or whether you're a shareholder or whether you're a creditor now what's important?
Yeah, sure. So I guess I'm close to 500 USD T, or DSTC. Claim holder so an absolutely miniscule tiny claim. But my day job is I'm a distressed investor. I work for a large family office and I, parents, unfortunately, our bankruptcy lawyers, so I know, I get involved in a lot of restructuring around the world,
including crypto. Well, we had to DM chat.
Yeah, we did. We did. I'm sure to get tons of DMS. But yes, I was DMing you about just
okay. So you're very familiar with the bankruptcy process? Right? Well,
I mean, like for me, I'm lumped in Jason. I had a chance to listen to the whole hearing, of course, and, I mean, yeah, so I'm very familiar. I mean, we have been in a million first day hearings. I mean, moving around from like, attorney, new attorney, unfortunately, it's something that happens it does make it a bit disjointed. But I mean, I don't know I have a question so much is can I add a little bit of color? What I thought about some of the hearing today, do you mind? Oh, go for it. Okay. Yeah. Okay, cool. Yeah, I thought the judge was like super attentive, which they usually are. Jason, I'm not sure. Simon you happy to do in the law degree as well. But anyway, I was just gonna say like, I forgot. Anyway,
no, I don't I don't I don't have a law degree. I just had this crazy idea of being involved in financial technology and realized you had to be a lawyer.
Well, you know, that's what that's what Jason's here but on on the in terms of the bankruptcy and stuff, so I can't really speak to securities law as much as Jason can. And it's great that by the way, you all if anyone hasn't listened the old conversation the other day about securities law and crypto, but that was great. So thanks for that. On the more bankruptcy centric stuff, the judges incredibly attentive, which they usually are mean federal bankruptcy judges served 14 year terms they're appointed. They're usually the better if not, you know, some of the better if not top notch. Lawyers in whatever district they're serving in, before they're appointed. And, yeah, they this judge is no different. So he's a very well respected attorney and now you know, judge and is very attentive to the thought to some of the arguments in this sort of idea especially on the first day hearings and sort of previewing legal issues that are contracted to see the case is quite traditional. You'll see judges pepper, debtors counsel with questions and there especially, was phrased, inquisitive on the first day when no no real you know, a lot of creditors are just starting to talk to counsel about, you know, about the case and about representing them. And so there's not as many creditors represented, right, that the UCC community isn't formed yet. And so it's nice to see the judge very attentive to that. Just to certain issues that were came up. Other things that went on, I mean, some of the first hearing motions can be a bit boring. And the US Trustee, just to give my my view on this, just as someone who just you know from being on a bunch of these calls first to hearing called your trustees are traditionally like, very conservative. They're like, you know, one bird in the hand. You know, they want two birds in the bush type of people and they really it's a particular type of mindset, and they're used to pushing back on veterans that are pushing for aggressive things. So it didn't surprise me that the US Trustee was pushing back on a number of items that were being filed by Kirkland and kurgo. His job as counsel is to try to give the client what they want, which is aggressive representation, and sometimes they will push the envelope and the things they do in terms of the X claim, I think our talking about the X claims agreement. I thought this is kind of a tricky thing that's come up and it should have been disclosed a long time ago. But I think just I just, I just don't want anyone to index claims or any Stratos to think that it's been misunderstood. But in this instance, they're talking about not having their usual agreement, which is where this is kind of unbelievable, where shredder would be providing either exclusive or exclusive rights basically to their data to x claims. And then x planes would share the Commission's they would get on the platform, which is kind of I don't know that's I can't say I was in favor those relationships without being disclosed to the court. So that was great to see the judges catch that they really caught it and Boy
Yeah, I I I agree with that. And, and what I thought was interesting was the judge saying, you know, I'm gonna kind of interim approve stretto but I need to see those documents. Right. We and, and that was, you know, that was kind of expected he was pushing back but who else is going to do the notifications between now and the next hearing? Right? It's not like he's gonna say no, stretto don't do it. Roll because who, who's waiting in the wings to pick up and go right because they've already been processing it so I thought it was a good compromise. You know, so long as you show me documents that show there isn't a conflict of interest or change the process
here. You can move
for in the clear in the void you're hearing for the hearing. That judge that actually sort of caught it. There was a relationship because there's counsel, which is Kirkland's as well. And then sauce Berg actually wasn't that not the gentleman, today Kirkland but so certain basically said oh, we're going to exclude the in the the traditional stretto agreement that has cluesive agreement was excellent. Really excluding that loose, Your Honor, because there's so many individual claimants, and just that, what do you mean excluding it? And he said, Well, we're gonna exclude it because they basically have an exclusive relationship and we don't think we need to talk about it, Your Honor, because we're it's been excluded in this agreement. Just said, Well, what is this agreement that they usually have? You're telling me in all my other cases, there's some agreement that I don't know about getting some of the compensation was telling. Surprise judge right. Just terrible.
Cool, okay. Yeah, go ahead.
Hi, everyone. Thanks, Tom. for having me up. Interesting hearing. I did not actually catch myself trying to read and follow some of the reports coming afterwards. But I was interested, the interested if anyone could provide a little more color on two points. Number one, this $900 million liquidation event from tether? I don't I was trying to see if there are any reports about this. And unfortunately, transcript is not yet available. From from Pat Nasser Kirklin. As to what what prompted that if there any details on that, why would that was permitted to repeat that we could speak to that? That one issue then I forgot one more follow
up. Plan C 20 days, not the legal side, but from your perspective, because I think you followed that when the Bitfenix team are amazing to you. And I think you covered this one a bit.
Yeah, I think I know a little bit of photos just from listening like you said to the CTO or believer or whoever was from tether but yeah, they basically on drop I think it was he was saying he couldn't remember exactly the exact details, but what he approximated was on the on the job for over 25k down. There was a point where Celsius his loans are liquidated and it was a they borrowed USD T against basically Bitcoin. So I don't know how much it was. I remember hearing initially, I think it was a billion. I'm not sure if they had paid down some of that. But they got Yeah, I guess they did because they got liquidated for 900 million. But then the question is, you know, with the with the USTC. You know, what did what did they do? They could do? They could in theory, if they had that capital, they could always buy back the Bitcoin at the lower prices. But yeah, we don't know. I mean, there's there's speculation I think it makes sense that Celsius might afford against the Bitcoin, you know, for the for to get those dollars to, you know, find something else obviously, like,
counterparty was like, couldn't they borrow through
I'm not sure. No, I don't know exactly who
they are. And so I'm not going to come in because I'm a shareholder of Celsius and nginx and nginx is the same management team and in the structure of the teller so I'm gonna stay with this when
it comes come up briefly in passing when they were talking about when lawyer Nash was speaking on Celsius as part when going through. It was somewhere between page seven and page 11 of the packet and I'm having to draw that from memory but they were talking about, you know, market impacts and things that that affected the company leading up to the bankruptcy. And I don't remember the exact number but I do recall Mr. Nash speaking about, you know, the tether sell off, and his response was an explanation was that regardless of the other sell off, that had nothing to do with with why they had to file for protection, they, they dismissed it as being insignificant and and what they focused on instead, and blamed more was that in the wake of the Luna collapse, Attorney Nash said that it was social media. That led to inappropriate not inappropriate, but incorrect claims that that was impacting Celsius, that cause the run on the bank and mash and Celsius had this theme, that they were blaming social media and blaming its own users for the fall of Celsius. During the during these drops in prices, precipitous drops in prices, and not the other things that happened to the market. And I have to say that I was a little disappointed that they were going to take that route and blame its own users and instead, not mentioned once their own culpability for making poor decisions in the process, also. Great. Hold on a second tone, Simon I just see that David Silva has jumped in. If you are plans, he could find him somewhere and then add him as a listener. I know that he was listening in on the on the call today as well. Thomas, did you want to talk about the maybe you maybe you recall some of the details of the other statement that that I didn't pick up on? Yeah, I guess
my I really was talking more about where you were you were talking about in reference to oh, gosh, what we're just talking about not the tiller statement, but
blaming blaming Twitter for Celsius demise.
Can I can I preview my view as a bankruptcy nerd person? On this is one of course, like the statements made by the attorney there and like, you know, don't really prove or disprove anything if there's causes of action later in the case against insiders because of like mismanagement, does not doesn't tell us anything. But in terms of, you know, it also could be you know, the debtors leaning, you're talking about four months before the petition date, you went from 22 billion or let's call it deposits to 4.5 billion of deposits. There's gonna be a lot of preferences in there. And David, you can help drive what preferences are basically any transaction within 90 days of a petition, they can be scrutinized as what's called a preferential payment, or preferential treatment of that creditor and be sort of unwound. And this is something that if for whatever reason, you have to go the liquidation route with the case that can be very sticky subject and Irish tomb that debtors Council probably wants to stay away from saying, Oh, it was within mismanagement, and I'm saying Oh, it's a classic banker on your honor. So the preference issue is going to be something we're going to really look at so it sort of maybe it's previews that but who knows it's the first day you know, the first day hearing are you really just getting all the, you know, cutting over the bumps that you have, you know, just kind of getting the word you want to call on you know, your emergency motions, you need to operate the business. And so these are not, but it was interesting that they did step over those things, but I don't know that it tells us that much. Really, because it's yeah, that was just an hour just wanted to add in the fact that it seemed to me like he was setting up this idea of if they do go the route of having to do liquidation, that the preferences are going to be something they're going to be looking at for recoveries for the state because this is a classic thing.
But I can actually see David Silver and where do you see Jason? I don't see him either.
But he sent me he sent me a text message through regular phone text message saying that he had joined and wanted to be let in I just sent him a message sign for him to quote raise his hand. That's very good.
Just another thing, Jason or anybody else who heard in the hearing today directly, I read a secondary report. I think from someone saying that, based on this asset snapshot, they submitted that Celsius custody accounts were about only like four or 5% of their total assets.
Yeah, I addressed that earlier that they said it was 4% Okay, and in that those that those assets while designated as custody were commingle
Yeah, yeah, see that? I heard you say that. earlier. And then I heard someone else report that the assets were isolated. So is that is that a bad reporting?
I have a very clear memory of the attorneys for Celsius, saying that the court is going to have to figure out what to do with the custody accounts and that they are commingle. There are interesting questions of law for the judge to decide is the paraphrased version of what I believe Mr. Nash said. I believe
they were the actual company. The accounts themselves are commingled, but they were separate from the urn.
Yeah, that's what someone else says. Yeah.
So the distinction really, is a paper distinction. Right. So they have to say that because they received a cease and desist order from multiple regulatory agencies. And Simon was talking about this earlier. I think Plan C knows about this as well. And that honor around April of this year, they changed urn accounts, that the only people that could have earn rewards accounts were people that were overseas or US accredited investors. And if you were not overseas, and you were not a US accredited investors, then your funds got moved to a quote, custody account, where the terms of service would change for those individuals because done done it up or rewards accounts as laid out in the New Jersey. Cease and desist. Order from a few other states are individual investment contracts. So that led to a reg D filing and a few other things. So they're they're treating separately, the earned rewards accounts, those assets differently than the custody accounts. And even though they're saying it on paper, there's no indication that I've seen unless I can see code for see a separate wallet, which we haven't seen yet, because we don't have disclosures that indicate that those assets are actually separated from other assets other than it being a different box on an Excel spreadsheet, right. It's just as likely it's a different box on a spreadsheet is that they are actually segregated at this point until we until we actually see that that proof and I think that proves coming.
Thanks. That makes a ton of sense.
Yeah, I mean, you know, the debtors Council as you know, professional, remember the phrase, but just professional conduct aluminum. It rarely is something on the record. It's incorrect. It's, it's gonna be they're not, of course impolite. When you're talking about Kirkland and, you know, national customers, like the top bankruptcy lawyers in the country.
I don't disagree at all, but it you know, if I'm seeing on a spreadsheet being represented by my client, that those assets are in a different segment. I can represent that they're separate and not commingled with the others. But I'm relying on that spreadsheet. Right. If you ask,
if you give your room could you just give you a reflection from a community member? Obviously not legal anything. Of like, what what happens that that custody thing?
Yeah, I can't speak too much to it. I mean, it kind of just came out of nowhere, and no one really heard anything about it. And then overnight, you know, I think there was only a couple of days or so warning given to the community, or maybe as much as a week was the max given everyone's kind of like, Oh, wow. Okay, so the unaccredited us can now no longer invest and then you know, all the any assets on the app that are there can remain but no new assets can be added from an accredited in the States. And then we were told about this custody, separation and yeah, that's pretty much all the community was told. Like we've we didn't really know for sure. Okay. Is this separate or not? Or are there different rates none of that was really told to the community was just okay. This is custody account. And my understanding is if for the loan situation like if you're needing to pay your interest on your loans, the the assets to pay off the interest on the loans had to be in the custody wallet, otherwise they wouldn't. You couldn't you couldn't do auto pay or whatever it was. So yeah, my understanding is if it was an earn if you had your assets and earn, it couldn't be used to pay the interest on loans, but it could be I could be wrong on that, but just what I remember.
So I have a slightly general question. This is more for Jason. How much does the existence of the sell token complicate this entire bankruptcy situation?
Sorry for the delay. I don't know yet. I'll just put it that simply. You know, to the extent that they're claiming the cell token, on assets accounts for what was it 600 million
present balance sheet. There have been indications and as you know, the judge pointed out there's claims of fraud in association with that. So this
is the fact that so was registered as a security and then traded on the cryptocurrency exchange, does what does that mean? In terms of, you know, the board's appetite to comply with regulatory compliance? Then there's the fact that risk management using using sellers collateral when it's a liquid is highly likely to lead to such a result happened. What else would the sale take? And then there's all the allegations that there was Bibles put up while telling the community to buy sell tokens, while simultaneously allegedly board members selling those tokens without the correct disclosure? So you know, there's all of these things and how does that relate to the bankruptcy stuff? I'm not too sure is probably a case around you know, the, the competency of the board to continue the business and execute the recovery plan, potentially. And also the fact that if they did want to try and open up business as usual, then it's likely to be met with regulators wanting to well, yes, speak to that maybe what, what would if their recovery plan was we want to open up business as usual? What would the what do you think would happen if they had to demonstrate that they could operate business as usual?
Well, so first and foremost, any regulator is going to say that you have to comply with securities laws. Hold on. I'm getting a quick message from David saying that he is he has raised his hand too. So, the federal government at the SEC and the state regulators especially since there are certain state regulators that already have cease and desist orders against the company have mandated that they comply with securities laws. I think what works against Mr. miszewski is that, you know, a month after he had active cease and desist orders from the state of New Jersey to stop selling or stop engaging in the earn rewards program. Not only did he not comply, he he gave an interview that said that effectively that that these regulators were wrong. I don't think that really works in favor from from a convincing standpoint to a creditors committee or to the judge that he's the guy that's going to be able to carry the ball forward when he refused to comply with state and federal securities laws. So without you know, trying to look at the tea leaves too much. I just say that, you know, the likelihood of being approved to carry the ball forward when there's demonstrable evidence that shows that the guy at the head of the wheel refuses to comply in the past. That doesn't look good for miszewski moving forward. I just put that doesn't mean that he won't, but that would definitely be, you know, indicia that he's not somebody to be trusted to go forward.
I still can't see David. If anyone else can
give you the credit report. Man I could be wrong y'all are y'all it doesn't seem like any creditors are gonna pull out current management
my yeah my experience it's
really a surreal experience that I'm going through right now. I've got like ever since I you know, ever since this bloody turned my life upside down. The I've got whatever tweet I tweet, there's just an incredible number of like, there's this small community that's very loud. That said, we want Alex Alex is this all of the DMS are just nonreflective all of the polls are like 95% or sorry, 85%. I think it was said so, you know, there's like this this Die Hard community. The do one that believe that Alex is the person that continue this and so I didn't know if any of those I'm sure that some of those people are trying to be on the committee. And then from what I can see, there's just a bunch of really, really upset angry people that just just distraught that this this has happened to their funds. And they seem to not want Alex anywhere near this again. I don't know what you're seeing fancy.
For real i I'm in telegram groups with a whole bunch of people there that are really large holders. Some of them are actually these are people that going in on the ICO and they've been here for four years. I've seen the full story of this. I've been here for two years for two and a half. But there's people I've talking to that, like I said, you know, hundreds of millions or millions of dollars on the app to the ICO and it's just interesting because they've been here for four years and, you know, the majority the vast majority of them are saying like, nothing, literally nothing that was told to the community over the last couple of years is actually true. Like so many things were portrayed in a false light. I mean, Alex brake many times on calls with the community. We're so compliant with the most compliant sci fi company we're following the rules, we're gonna have no problems, like bragging about how compliant Celsius was and Alex was like multiple times on fun on calls to the community. This was parroted throughout the community like oh, we're, we're great. Other sci fi companies will have problems with selfies have been defined in this area. So yeah, it's just it's a it's kind of amazing as you think about folding, you're someone who's been here and really paid attention. But But my biggest mistake was believing a word Alex, because the more I learned literally the more everything is the exact opposite of what we were told. And and the terms and conditions I mean, it's always your responsibility to read them but oh my goodness, like if you go and search CMA, like my question to the lawyers here would be like, Kenny, can you have terms of service but then go on calls with the community every week and literally say the exact opposite stuff?
Like Well, yeah, yeah, you can.
You know, and and what you get then as you get an individual fight amongst individual people, what they relied on, right, so somebody that never knew that the AMA existed, somebody that never knew that the statements were made, has no knowledge of it. Can't say read the Terms of Service for them were way. Somebody that actually has recordings of it, and then can say, Yeah, I've watched that and I relied on those statements. You could say, well, the terms of service in terms of the deal, were 100% modified by the statements the person in charge an agent for the organization upon which I've relied in order to form the basis of my contracts, regardless of what the terms of service say I relied on a statement. And that's where when you look at securities fraud and Moody's cases, you get very complex because you're supposed to look at each individual purchaser under the circumstances and when they come to the table, and they give their money at that moment. What did they know? What did they understand? Right? And so we get into the basic, you know, year one, law school contracts, theories that talk about did you have a meeting of the mind at the time that you handed over your money? And to the extent that you did not have meeting of the minds at the time that you handed over your money where you did not understand what's going on based on beliefs or statements. This is where the word rescission comes in. And that is a remedy for somebody who buys an investment contract and did not understand at the time when they purchased it, or had they known the truth of the matter at the time that they purchased it they never would have made it. So instead of asking for, you know, damages or tort claims or whatever, you just say I want contract rescission, give me my money back. We go our separate ways, but this this becomes very complex and very convoluted very quick.
But Jason and David, do you worry that like any rescission or any other securities litigation claims are, I mean, under the bankruptcy code, there can be claims so they are subordinated to customer accounts.
You're talking 1010 B five, you may
believe it's in the five
you said 510 b That's That's why Yeah, thank you, sir. Yeah. So the show none of
that bad. But I'm just trying to, I mean, you can't
because they're not they don't have to be supportive claims. There are circumstances where you know, let's say there's a group of people that are all similarly situated that have claims that are not core to the bankruptcy proceeding. Right. So you know, a group could come forward and say, Look, we have similar fraud claims. They're not core to deciding how the company should move forward, but they they have to do with this particular fraud and who better to decide those issues than say, an expert arbitrator for the triple A that you know, his experience, they focus on securities law, and the judgment of the triple A can can come right back to the security or to the bankruptcy court and the judge can figure out what to do to that. But the administration of those claims are probably better handled outside as a non core issue. So there are ways the individual fraud can come about Now whether that's regulatory fraud, but brought by the SEC or by a state regulators. That's a completely different ball of wax, as opposed to creditor claims, so we just need to draw that distinction. Well, yeah, but
I mean, you have the motion the court relief on the on an entity to bring or continue that litigation but it still be 510 for purposes of a plan with 11.9. Brochure they still look good.
Right, you can still go and get the determination of fraud somewhere else from the left to the stain to go have the issue decided under a different forum. Right. And whatever award happens there absolutely goes back to the bankruptcy court to decide how to distribute that,
hey, this this, this goes to the wholesale things are changing the subject slightly. I have noticed that there is a correlation between those that seem to really want the price to sell to go up. And those that support Alex and so there is definitely a game theory community. You know, there's definitely something going on there. You know, I can't prove it for that. It's just an observation. But those that are that are really, really getting behind addicts tend to be the people that really want the price of sale to go up. And those that, you know, there's a good degree of people and this is why I tried to do disclosures when people come there's a good degree of people may have actually ended up with all of their funds in sale because they click sell rewards. And then there may be took out loans in order to buy or sell. Now the interesting dynamics is all of those cells so there was three of those organizing that is true, but there was someone that was in analysis that 93% of sales taken a look up on the app. And so there's there's a strange dynamic going on right now where there's, you know, there's very small supply of cell tokens there. Is not really reacting to the market. And, you know, just business as usual, and that opens you've got literally the entire cell supply. And then that relates to the balance sheet because the balance sheet says that there's the hole is at 1.2 billion 600 million cells open. Now
well, yeah, and that makes sense, right? Because today right now as I look cell is trading at 81 cents. But if you go back a year, so was it. What $5 At, right from a from a standpoint of closing that gap, and that gap if Sal was trading at $5 at or $5.90 what bankruptcy for I bet and so I can see that argument. But I did want to point out, Simon that David Silver was finally able to get in, he's in here now. And I was able to I was able to approve him as a speaker. All he has to do is unmute himself and you can come in.
I appreciate that. I apologize for not knowing how to use this platform, but I thank you guys for loving me.
Okay, cool. We're all in anticipation now. David.
Yeah, I thought today was very interesting. I think this is a typical for people who haven't participated in a bankruptcy today. Today it was about hearing Celsius, his version of the event. It was when you watch TV and you hear the the plaintiff go off and the plaintiff gives their side of the case or prosecutor comes up and they have a story and that story is always very slanted. And this really reminded me about today was all about we heard Patrick Nash who was one of the most expensive lawyers in the world, that he is one of the best in class lawyers. Who does what he does, gave a very slanted view. And he blamed for things today for the fall of Celsius. He blamed five he said social media and whether it was a thought. He then said that the market conditions in the crypto winter was that fall. He then said that this coin base in April filing a Hankyu that talked about bankruptcy was at fault. And then he said that there was a Munna where Luna led people were saying that Celsius was gonna try and buy loot and what he never once mentioned. And one of the most astonishing facts that came out today was that the only institutional lending right now was $93 million. There was collateralized with $96 million, meaning that there is absolutely no law to show lending. And one of the things I'm asking the investigative reporters to do, I'm asking my own internal people to do. I'm asking them to look into how many videos of Alex mission be exists today. We're Alexander Schinsky, said that institutional lending was the primary way that Celsius made money, because I'll bet you that numbers over 95% Because that's
the David I know somebody that has a search so I know somebody that actually created literally took every single ama that Alex has ever done and created a search function, and so they can search keywords for any ama clips, basically. And yeah, so I guarantee you from listening a lot of those AMA's like I trust me, I know that like 90% of the community, if not more, probably 100% did not understand the risks that were being taken the vast majority, you know, thought these were collateralized loans to vetted institutions. That's what we were told for years like it just yet. None of the stuff that's coming out is even remotely close to what the majority of the community assumed were the risks and what Celsius were doing their funds.
Exactly. And I think the plan of fame is a little tongue in cheek for people who don't know me. You know, exactly everyone thought what an Alex Solon was safe secure institutional, institutionalized lungs. Can you imagine right now that Patrick Nash, basically and the Kirkland lawyers have now told you that Celsius is simply a Bitcoin mining company? Because that's all the fluff and a whole enough hours today and the only spice today, we're about this desperate necessity. I'm gonna get the number wrong, I think for 21 days, the $5.8 million and most of the $5.8 million is to help complete the Texas mining facility.
So, David, I'll help you out. I think it was 3.5 million and construction where the 3.5 million was not going to go to the construction company itself. It was going to go to the mining company that was going to distribute that money to this construction company and the trustee kind of took exception with that saying, you know, show me the electric bill. I'll pay the electric bill, right. And then there was an additional 1.5 million set asked separately from the critical expenses category that was in the taxes category, and that was 1.5 million to pay customs and duties for mining rigs that are waiting to come into the United States that are supposed to apparently go into that unfinished mining facility.
And they're using the projections of the coal mining the coal mining platform to basically say, let us keep going and the trustee came out and said look, I think that should be the up to the creditors committee. If the mining facility should be, you know, fully utilized. And the creditors Committee, which again, I'm sure you guys said this already, applications are due Wednesday by noon, there will probably be a committee in place by Friday. And then after Friday, there will probably be interviews. The creditors committee is going to hire one of the best law firms in the country. You're the creditors committee is basically the voice of everyone out there. And I do think I agree with what Simon's keep saying it's gonna be very, very interesting to see what perspective the creditor committee takes about supporting Alex machine ski verse supporting a different voice in it differently. It's my expectation that Alex wishes he has less than 30 days left of controlling my head to take a guess from the city. 14 days would be the over hunger points for how long Allah days as the head of
David, David, how does how does that process work? Like how could a CEO be removed for the majority shareholder like what would be the process that would lead to that happening?
So the reason why I strongly believe that allocution even desperate to keep celcius out of bankruptcy, and why they actually did the collection of collateral and moving everything around. So most people, when you have a business and you say or you misrepresent what your business is, or what your business does, you don't go to jail. It's just a bad business and you follow the snake oil sales in bankruptcy. Lying in bankruptcy is a criminal act. And here is why the affidavit allocution p file contains some of the egregious acts that happen. So what's happened is our consult will be forced, I believe, to resign. His lawyers have been calling me to step down because he won't be able to defend after action fashion, people never going to be able to defend all the videos that misrepresented. This was
the David Davis did you find it remarkable or not? When the judge asked Nash if he wanted to submit Michelle skis declaration as part of the evidence for the motions and mash declined to offer that at that point in time?
And we partner net that down and you've worked with bringing the background whose natural partner who said no we're going to offer compact is the affidavit we will not offer machetes but he's already committed.
I just thought it was I just I thought it was telling from you know, that morning or this morning SEC contacts. Celsius and then even though it's already on the record, machetes declaration, even though companions declaration is already on the record. There was no reason not to offer Michel skis declaration as part of the motion to support as part of evidence to support the motions. But they specifically said no, we're not going to offer it. I thought that was very interesting.
So eventually, what do I think's gonna happen which was promised this question the trustee can move to replace him. There's a variety. I mean, there's a variety of different options. I actually expect him to step down, because I believe the creditors committee when they do their presentation, their presentation is not going to be that Celsius failed because of the crypto winter because of market, the VIX the bitcoin price. And because Coinbase file the Xs Q. We said that bankruptcy was an option, and that Celsius was somehow high goal this I think that the presentation by the creditors committee, with the information both public and non public at this moment in time is going to be that Celsius misled people into what type of loans they were giving. And that Celsius that will be on Celsius will be required to present. How old are crypto moves? I actually thought that was most interesting thing. That was the one that thing the judge got the judge today say you need to show to Kirkland and Ellis all of the crypto moves because the trustee kept saying they are not giving us the information about the crypto movement from entity to entity and I am not a bankruptcy specialist. I am going to be working with a bankruptcy specialist when we present the creditors committee, but one of the key questions here is to one no one's gonna question that money moves from entity to entity. And I thought on the structure charter was very interesting, how they pick which entities they put into bankruptcy and how they decided which entities were going to be non bankrupt entity non bankruptcy and the mining company. Oh, one of the non bankrupt entities $500 million. So when people keep asking me, you know, where's that 1.5 million $2 billion hole? You know, they very clearly have chosen which entities they want in bankruptcy and which entities they don't. I don't I think we're at the beginning of the litigation, I believe ultimately will be everything get wrapped up in bankruptcy. But at the moment, the only thing that we know for sure, is that Alex machine ski sat there in a suit and tie and look like a guy who knew he was heading towards an execution Wow, that's,
that's provocative. David. I don't know if I would have said that. He knew he was going here at execution. I think what I said earlier was that he was the I think I said earlier that he was the picture perfect example of somebody who was well coached by a high dollar law firm to not respond in any way shape or form and to be as stoic as possible. But if that's what going to an execution looks like, for David Silva, then then then that's what it looks like
when they've been rewarded. The third that they bank the unbanked
no comment Thomas you were going to say something?
I mean, traditionally, you have more CRO or yo company and come bankrupt. They don't they don't normally you know that thing they'd rather than just sit there in case somebody has some question about their affidavit or declaration. I don't know David, I think you I position. You in Jason's while y'all feel like someone's really misled you know, claimants or I should say customers. I can't disagree with it seems like there's a lot of purchasing activity is going to be scrutinized by the bankruptcy causes that was brought, but I don't know 30 days seems tight, I think, unless there's like actual more shoes to drop in terms of fraud. I mean, it's kind of known that you've done some of this stuff. Pre petition, the question is going to be does it does it rise to the level of legal action? I guess doesn't Batman and say, Yes, this is the level of criminal action where he actually moved out. I mean, he gets into stage left and social liquidation he tries to get releases that everyone will fight relations all the years of litigation, even if you do a reorg plan. They'll still be like a liquidation or litigation trust, to little ramp to be a source of recovery. For actions preposition activities, like selling sell tokens or breach of fiduciary duty or misrepresentations to some causes
Well, there's also the distinct in real possibility that the SEC and or the states could bring individual action against miszewski directly. There's nothing prohibiting them from doing that. The bankruptcy protection for Celsius doesn't prohibit those organizations from going after miszewski individually for fraud. So that that's something that if that were to come to light, I don't know how miszewski could continue to say that he's going to stay at the helm when he's also battling those types of types of claims. Just Just something to think about.
Yeah, I mean, I think I got to be bothered with it. The other day when we do a climate program. When I said, I think one of the biggest problems, you know, they got blown tax fraud. I think that what they're going to end up if it's true that sells gifts is really bankrupt. 2021, which some people believe, again, I haven't seen any inside information. I am only going on public reports. But there's tax there's many tax issues. But I think though, there's one drawer out there that I do believe that if you really sold $48,000 of tokens, which is such a nominal amount. I took a small amount of all of it on a day when he represented that he has not sold any Celsius tokens. He's actually got a more legal problem there. That will unfortunately, even if he's completely innocent, and just a bad businessman, that would trip him up in actually representing the company moving forward because that is just a first day violation and an act of security. So what what I will say I still have not seen anything criminal. I have not seen anything that makes me believe that Schinsky was anything for the bad businessman when he was company that we represent people. People do want his head people want obviously, for you know people want him to people wanting to hold him responsible. Lots of businesses now. I'm really interested to see when all the data gets turned over. Again, the trustee was very much harping today to the judge about transparency and the lack of transparency from Celsius so far. Normally what your lack of transparency is because they're trying to cover the holes, then you get in more trouble with trouble with the cover up than you do with the actual, quote unquote crime. It's gonna be very interesting when we see the next side of the story, and that's gonna be the next 3060 90 days. But I do believe that, you know, there's a lot of videos out there someone sent me a cringe worthy video of Alex, you know, and a young woman where he did this video where he was talking about what Celsius did, and it's cringe worthy now, but there's so much video out there on the amas and I'll be speaking at conferences, and all these things. It's all gonna get parsed through there's a lot of money for lawyers, bankruptcy is an arcane side of the profession. A lot of bankruptcy lawyers right now are salivating at the opportunity. That's beginning go on every single rock.
Keep an antedated even ends
we all good. I agree with that.
Any Watson's gonna come I mean like look the number one lesson to come out of this. Stop believing in, you know, Ponzi schemes and given up your key for several percent interest. Hey,
I'm sorry. I've noticed that Simon for the last about 15 minutes has been trying to get in here. Let's let's let Simon the host of his own show. pop in for a second.
Yeah, I think lessons are. I personally believe that there is a model of of people that don't want to sell their Bitcoin be matched up with people that want to pay interest, but it has to be pristine collateral. I think the other lesson is that you can actually really fuck off or multi billion dollar business just by having a token
once at a time, and that's what I would say that is anyone gonna walk away with the lesson that these projects do not need a token. And when they have a token, it allows people to have no idea what they're doing to compete with people that do know what they're doing in the same product, because the token up front gives them billions of dollars, that someone that knows what they're doing wouldn't have and it gives incompetent people and unprecedented competitive advantage against contracted people by go with
the program. So sometimes what I'm gonna say, Simon, I'll say this as well. It's a difference between you know, Celsius his token when it was offered, and any other you know Ico craze. platform when it was offered. The difference between the two is that Celsius actually registered as a reg D filing and admitted that they were issuing the token as a fundraising event. They never offered it from the beginning as some form of you know, necessary element or utility token on their platform that did anything other than raise capital,
the way the real easy way of figuring out without JASON It's just how they report on their taxes. Because if there's a membership utility token is revenue and you pay tax on. If it's a security, then it's fundraising and different. So it's pretty easy to determine how they're treated.
Right. So show that the problem is that the fundamental fundamental mistake that they made and I've advised a few companies is that if you're going to use a token to raise money, use a token to raise money. If you're going to use a token as part of a rewards program, don't use the same damn token. From a from a structural standpoint, but that's a little that's a little off topic from Yeah,
and then the third lesson is what Steven silver said is I do believe, Alex, from what former I can tell, you know, I haven't really looked into these things, but I know there's going to be quite a lot of press coming out about his previous businesses, because people have been contacting me, but he seemed like he was competent at credit. Now, when you create a tech startup, you over represent everything because everything's against you. When you are involved in financial services, you have to underrepresented everything because everyone will come back to you. And you know, there's there's a different level of responsibility and the information when people are going to lose money or make decisions based upon what you say. So, you know, the lesson is that Alex may be a great business person, but it is not something that can run a financial services company as well. As they are now.
So when you know some some folks know that for a while, I clerked at the Oregon division of finance and corporate securities when I was in law school and I was able to be exposed to the registration and the enforcement side of things and get a get a flavor for how state regulators operate and and the things that they they go after, you know, some things were like, Yeah, we don't care about that. That's not harming the public. We're not going to waste our resources on that. And there's a certain amount of advertising or what's called puffery, which is allowed when road showing or representing your company that they anticipate or expect. You know, a new startup is going to do in order to try to promote their services or promote their business. As you know, let's just accept the fact that salespeople are going to do when salespeople are going to write, but there's a certain line and you know it when you cross it kind of a thing. Where it changes from puffery to just lies, just fraud. And that's really where the state securities regulators come in. That's where the SEC comes in. Are they making statements that people are relying on to their detriment that causes them to lose money? And again, this is this is off the bankruptcy topic, but it's somewhat related to, you know, whether Ms. Schinsky is going to be able to allow, be able to be allowed to continue on is that and full disclosure, I don't hold any Celsius assets. I've never been a user. I've never owned a token. I'm trying to come at this from a purely objective and clinical, you know, observation standpoint, when I'm making my observations. And full disclosure, I do have one client that has an arbitration claim against celcius but my comments here have nothing to do with with that is when when looking at, you know Schinsky I don't I don't see or I have not seen any evidence that this guy doesn't know where that line is between puffery and lies. And Tony, I think you've spent more time with him. Maybe even Simon but but I don't want to represent that. There seems to be a universal character flaw, a serial entrepreneur that's had several companies that have had been started and he's just used to making these statements and am I off mark on that?
I can't really comment. I've run across him at several conferences. I've only had one, maybe two interactions with him. One of them was recorded to host a video that I found recently, where I basically called out his entire project as being a Ponzi. But this was back in 2019, early 2019. It was obvious to me so I don't really I can't really comment on his ability to run a business or anything he did in the past. I have no idea.
I don't know about the past. I think I think the the one that hit the community the most was from my perspective, he clearly knew that there was a big hole in in sales. Well, either the financial systems were so bad that he didn't know there's a hole or he didn't know there's a hole because there was a hole and over he knew that. One of them is that you know, this company just grew so fast, the systems and controls never implemented. And there was no way of tracking all this stuff. Totally plausible that I can happen.
Well, if you read between the lines in some of the filings and motions that there are statements made by the celcius attorneys that say that they had, and I'm paraphrasing here, poor practices in pest management that they were working to
correct. Yeah. So you know that that can happen in these high growth companies where everything's complicated, and you go, we'll do tokens and accounting software. It's not, it's not easy. These are hard processes, and then you are secure. You know, so that's something that can happen. Or he knew about it, which is where, you know, we've heard these certain cases where there's hacks or there's certain things that happened where money was missing, but the point is that when he realized this lunar situation was coming, and then people started to question the solvency of Celsius. He went around and did the roadshow to everybody. And, you know, with the sole goal of trying to get people to deposit more and not withdraw and the bit that propensity was when he contacted our team, you know, we were working on combined are you referring to
the June 7 communication from Celsius said Damn the torpedoes full speed ahead.
Not sure the exact one but you know, there was literally every he took every incident sit down with him where they will, they will literally had calls with him and said is there Okay, is there an issue? I'm not letting you on my channel unless you let me know and then you point blank told them there is no issue and he just took their reputations down and now everyone hates them because they let him on his channel where some people didn't withdraw based upon watching those videos. And, you know, the whole community was saying this fight, fight fight going nuts. You know, the people like, you know, Cory and Mike and Max, for creating the run. But essentially, what as it turns out, they save a lot of people because a lot of people were drew because of them. And, you know, they're not they're not on the same causes are suffering financial loss right now. Because of that, but, you know, the fact that he just went around and, and contacted our team saying, you know, I just asking us, you know, Oh, can you get some more you know, can you get some more of your retirement funds in Celcius. What are you going to do? How many more retirement plans we're going to open and stuff like, you know, just just know, in order to make sure that this hole was not exposed. He appeared to me that is more than willing to get more people's retirement funds into this. Rather than just coming out and saying right, to suspend withdraws. There's a liquidity issue and there is there is a hole
and that that's that that was
the bit where it just seemed, it seemed clear that and yeah, he clearly went and tried to get more and more people to put more and more money into this.
Well, should we should we try to take a question or two. At the end right now,
people a lot of being the same question about how can I get on the creditors committee? The answer to that is more likely than not the President's committees going to be seven people, maybe nine people. Most of them will be selected by how much money they lost. They usually do a high amount of money. There's nothing you know, one of the two people that lost 30,000 or 50,000 in savings. They will people usually one or two random people, you know with different experiences besides Biggest Losers, financial amounts of money. So you should apply. I advocate for everybody who's trying for the creditors committee, because you deserve a voice. You shouldn't have a voice. But there's nothing I or anyone else can do to get you on that. That is the Department of Justice trustees office, but it's important that you should apply because they should know that when they tell the judge hundreds of people want to serve here and then everyone is entitled to their own viewpoint. But statistically, the amount of the people who serve on the brothers starting next week, are going to be the people who lost my guess is somewhere from 15 to 30 million
who let's bring some people in so we've got
oh, real real quick. But since you mentioned Cory Cory clips Dean and he was very diligent and instrumental and calling Celsius out for a little while now. Can he get roped into this mess could do like the Celsius defense team. While I put so much blame on social media Fudd and they find something like let's say, Corey sent out 100 tweets calling out Celsius, and one of those tweets was not exactly accurate. Could they kind of like put a lot of blame on him and rope him into this because I know they have a little startup. And I would hate for them to have to spend hundreds of 1000s of dollars on lawyers can it is not possible.
I'll give an answer to that one. Once you can't stop anyone from groping anyone in unfortunately, that means you got to spend money to defend yourself. No, I would not. There's not going to be I mean, can you there's not going to be they're going to spin the story that it was the bug created on social media that led to the bank run. But if they were truly insolvent in May of 2021 and misrepresenting it. There's nothing that they're going to say about but of the bankruptcy. Again, I think that's the story we're going to see crafted by the lawyers for the creditors committee that starts coming out in the next 30 days.
Oh, Sad Baby metaverse. Yeah no. Okay.
Let's bring the next person
me You set my relation to John
Anita Can you hear us? Okay
bring someone else in 123. If both
of you asked Taylor there with his hand up and speaker privilege.
I can't hear anybody
hear me. Yeah, we can hear you. Yeah, yeah, we can hear you.
Okay, you can't hear us.
Taylor, can you on my plane ask the question.
What are why were we if you were an accredited investor in the US, why were we grandfathered in if they knew like it wasn't allowed, you know? Like, was laying by unaccredited investors in the US that were already had stuff on the Earn platform got basically grandfathered in you got to keep earning rewards when they like did that whole remove everybody off to the input and custody.
Saying buddy, I'll take a guess. So
yeah, go for a Jason but I think behind the scenes they were negotiating with either a state regulator on the SEC or both. And they were trying to make news as my guess, to show them that they were taking this seriously is you'll be interested in the other one because block five they just simply you know they had to settle 100 million. They filed for this to be a security and then they had some kind of grace period to get there but at the same time, clearly the SEC you know Coinbase closed their lending program and clearly the SEC was speaking to the whole industry. So how would you interpret that?
So this is Jason. You know, I've talked about this before, I'll kind of recap it here. The same type of lending program that the Celsius platform was doing was the same type of program that Bitcoin Savings Trust was doing back in 2013. And the SEC spoke very clearly. And so to the courts back then, I was involved in that case that those are unlicensed unregistered securities, give me your crypto, I'm going to do whatever I want to with it. At the end of a certain time period. I'm going to give you more crypto back. That was under SEC Shavers. That's an investment contract, period. Full stop. We've known that for well, at least eight years. So it was very easy for the state of New Jersey when they issued their cease and desist order. Back in September to say you're doing the same exact thing. You need to stop and there was a cease and desist order that came out and then simultaneously I think Texas, Alabama and a few other states do the same thing. And Celsius did not comply. They refuse to comply. And so in April, apparently, you know unbeknownst to the details, I don't know what the details are. But something happened some form of pressure was put on to where you can see in Edgar which is the SEC filing platform that celcius filed for REG be filing related to the sell token within the rewards program. And then shortly after that you have the differentiation of accredited versus non accredited US investors that would come from a reg D filing means that securities are are only being offered to accredited investors in the United States. Now here's the trick. Generally speaking, that reg D filing is only allowed in a safe harbor to be filed within I think it's 15 days from the first sale. So how they were allowed or continued or approved to file that without some form of scrutiny and based on clear sales of the earn rewards programs going back at least a year if not more before that. is a mystery. That's something that's left to the regulators to decide how they're going to regulate. But the differentiation could be at that point in time was based on more likely than not administrative pressure and the reg D filing that took place which meant that they had to do some form of restriction or some form of restructuring of that program.
Hopefully that answers the question.
It's, it's, it's the security is only accredited if you do the form d but you can you can deal with if you are licensed and you've got all the correct set up. You can deal with non accredited to offer custody services if it's not the security.
If if the program is is registered as a general offering, absolutely not accreditors and non accredited investors can come in but that means you have to deal with a panoply of you know, regulatory filings that go along with that the same as any other company that's offering stock to the public.
And so when I say custody with this case,
allegedly right yeah, yeah. Right because maybe because custody at that point you could argue that's more like a secured loan where there's assets behind it as opposed to you know, this general investment scheme that's happening to you know, so if think of it as like a you know, a title and loan company you bring your car and you say I want 5000 100 against my car that hold the title, you know, that loan is secured against the title to the car so that that generally falls outside of securities regulations because, you know, the person giving a loan has some security interest in something else.
Yeah, but I have all the lending licenses which I haven't seen associates,
right. So so they're falling under a different regulatory scheme. And so the question of whether or not securities regulations apply, and in circumstances whether or not there's an adequate regulatory umbrella, over the transaction that that it makes more sense than us securities laws being in place
wasn't having a two parts to the transaction. So you've got people that are bordering which would normally be a consumer credit. And then you've got people that are any yield, which is, you know, without a doubt in the US being called a security and the SEC, and there's two there's two parts of that. And then you've got transactions which would be a money service business. And so you've got you know, there's there's, there's quite a lot, there's, there's different parts of what seems like one transaction to the user
Yeah, it's a regulatory minefield to be sure.
Wonderful lawyer question.
I gotta get going. But yeah, we should do another law review and maybe in like three weeks or so after the next hearing on the YouTube channel.
I'm gonna crash I haven't even had my dinner yet. So probably a good time to end. But yeah, we could carry on talking like this. So there's going to be more everyday development. So thanks, everybody, for joining us. And thanks for everyone for giving the updates on these hearings. And just providing an education for everybody. And I think the end result is that everyone's gonna be a much better investor and going to understand a lot more about these processes. Okay, I'm gonna end the recording will be available, so feel free to share it with anyone else that couldn't make it or benefit from this bio.
Very good. Thanks so much for having me on and we'll we'll do it again soon.
Cheers. recruits are ranked? Have you made yourself a coffee or coffee?
Just please head to the tea this morning