Sebastian Sinclair

An investment firm run by bitcoin backer Simon Dixon has canceled plans to acquire embattled crypto lender SALT, which has suspended withdrawals over exposure to FTX.



Dixon&#8217;s investment unit BnkToTheFuture <a href="https://bnktothefuture.com/blog/bnk-to-the-future-announces-termination-of-loi-with-salt-blockchain-inc/" target="_blank" rel="noreferrer noopener">said Tuesday</a> it tore up its non-binding letter of intent over SALT&#8217;s positions kept on FTX, now defunct following a <a href="https://cms.blockworks.co/news/ftx-bankrupt-hacked-investigated-a-timeline-of-events/" target="_blank" rel="noreferrer noopener">dramatic week</a> involving allegations of misuse of customer funds and other corporate malfeasance. 



BnkToTheFuture added that SALT (Secured Automated Lending Technology) had failed its due diligence investigation.



Also on Tuesday, Shawn Owen, SALT&#8217;s CEO, said the platform would pause withdrawals and deposits effective immediately due to its exposure to FTX. 



SALT, which signed the letter with BnkToTheFuture in <a href="https://cms.blockworks.co/news/crypto-lender-salt-in-buyout-talks-2-years-after-sec-settlement/" target="_blank" rel="noreferrer noopener">September</a>, allows users to take out crypto-backed loans: &#8220;Once you pay back your loan, we’ll return your assets to you,&#8221; its site reads.



&#8220;I am sorry to report that the collapse of FTX has impacted our business. Until we are able to determine the extent of this impact with specific details that we feel confident are factually accurate, we have paused deposits and withdrawals on the SALT platform immediately,&#8221; Owen <a href="https://twitter.com/TiffanyFong_/status/1592575979985465344" target="_blank" rel="noreferrer noopener">wrote</a>.



SALT&#8217;s native token of the same name quickly dropped more than 20% after the notice was sent out. It now trades at under $0.0328, down 70% year to date and 99.9% below its all-time high of $17.22 set in December 2017.



Customer loans will remain active and monitored, Owen said, as SALT attempts to navigate a path forward with its partners. The platform will honor on-chain deposits in the meantime but Owen strongly urged users not to send any more funds to their accounts.



&#8220;We hope that you understand that we are committed to protecting our customers above all else and are working around the clock to do everything possible towards this as our top priority.&#8221;



SALT <a href="https://www.sec.gov/enforce/33-10865-s" target="_blank" rel="noreferrer noopener">ran afoul</a> of the US Securities and Exchange Commission in September 2020 over its 2017 initial coin offering, which the regulator deemed an unregistered securities sale. The startup was subsequently ordered to pay $250,000 in a civil penalty and to return the $47 million it raised to investors.



<h3 class="wp-block-heading">Not just crypto lenders, Liquid also suspends withdrawals</h3>



Dixon&#8217;s BnkToTheFuture said it has not been impacted by either SALT or FTX. The firm, which helps accredited investors back fintech and crypto projects, has no connection with both platforms and that all client funds are “fully segregated and uninvested,&#8221; per a <a href="https://bnktothefuture.com/blog/bnk-to-the-future-announces-termination-of-loi-with-salt-blockchain-inc/" target="_blank" rel="noreferrer noopener">blog post</a>.



BnkToTheFuture has however had its fair share of struggles this year. It was the lead investor in failed crypto lender Celsius back in 2020 and held 5% of the firm at the time of its bankruptcy in July, with 1,039 of BnkToTheFuture <a href="https://bnktothefuture.com/blog/celsius-recovery-plan-a-statement-from-simon-dixon-and-bnk-to-the-future/" target="_blank" rel="noreferrer noopener">users exposed</a>. 



Dixon himself was one of Celsius&#8217; top depositors as it went bankrupt, although he&#8217;s said that money kept on the platform represented &#8220;a small percentage of his wealth.&#8221; Dixon, BnkToTheFuture and SALT did not immediately respond to requests for comment.



SALT had no doubt hoped the BnkToTheFuture deal would amount to a favorable buyout, given the platform&#8217;s rocky history and widespread troubles for crypto lenders.



Rival platform and <a href="https://cms.blockworks.co/news/how-blockfi-went-from-tech-unicorn-to-crypto-burnout/" target="_blank" rel="noreferrer noopener">former tech unicorn BlockFi</a> also suspended withdrawals last week and is now reportedly on the brink of bankruptcy. Prominent competitors <a href="https://cms.blockworks.co/news/celsius-top-brass-redeemed-millions-weeks-before-withdrawal-freeze/" target="_blank" rel="noreferrer noopener">Celsius</a>, <a href="https://cms.blockworks.co/news/voyager-to-liquidate-assets-at-auction/" target="_blank" rel="noreferrer noopener">Voyager</a> and <a href="https://www.hodlnaut.com/press/an-update-on-29-august-ijm-hearing" target="_blank" rel="noreferrer noopener">Hodlnaut</a> all went bust earlier this year following the demise of algorithmic stablecoin ecosystem <a href="https://cms.blockworks.co/news/class-action-suit-accuses-terraform-labs-of-deceiving-investors/" target="_blank" rel="noreferrer noopener">Terra</a>.



Lenders aside, <a href="https://cms.blockworks.co/news/ikigai-fund-caught-up-in-ftx-contagion/" target="_blank" rel="noreferrer noopener">US-based hedge fund Ikigai</a> has been left bloodied after discovering it was unable to withdraw most of its client funds from FTX.



FTX-owned Japanese exchange <a href="https://cms.blockworks.co/news/ftx-contagions-next-victim-a-japanese-exchange/" target="_blank" rel="noreferrer noopener">Liquid Global</a> has also been hit. Liquid, founded in 2014 and one of the oldest crypto platforms in Japan, paused withdrawals on Tuesday for both fiat and crypto as part of FTX&#8217;s chapter 11 bankruptcy. 



<a href="https://cms.blockworks.co/news/ftx-acquires-liquid-group-expanding-presence-in-japan/" target="_blank" rel="noreferrer noopener">Liquid was acquired</a> by FTX in February as part of expansion efforts into the typically stringent jurisdiction.



David Canellis contributed reporting.



H/T: <a href="https://twitter.com/TiffanyFong_/status/1592575979985465344?s=20&amp;t=GLYE9EJDzEAJ8L4mxTiuKA" target="_blank" rel="noreferrer noopener">Tiffany Fong</a>



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BnkToTheFuture

Crypto Lenders Keep Pausing Withdrawals Citing FTX Exposure

Shalini Nagarajan

<div id="highlights-block_632194b5e6fdb" class="highlights">
 <ul>
 <li>Employees were skeptical about Celsius’ comeback plan at an all-hands meeting on Sept. 8</li>
 <li>The Federal Trade Commission is looking to join the case, court filings show</li>
 </ul>
 
</div>



Celsius sparked a flurry of anxiety over liquidity issues in the crypto lending space after the company was unable to meet <a href="https://cms.blockworks.co/celsius-faces-heat-for-1-2b-balance-sheet-hole-customers-owed-4-7b/" target="_blank" rel="noreferrer noopener">$5.5 billion</a> in liabilities due to bad loans.



The lender is now putting together a restoration plan to help repay creditors and win back customers, according to a <a href="https://www.youtube.com/watch?v=40-w9r7WSKM&amp;t=72s" target="_blank" rel="noreferrer noopener">leaked recording</a> of an all-hands meeting held on Sept. 8 shared by Celsius user <a href="https://twitter.com/TiffanyFong_" target="_blank" rel="noreferrer noopener">Tiffany Fong</a>.



At the meeting, CEO Alex Mashinsky and chief compliance officer Oren Blonstein outlined a plan for “Celsius 2.0” — an ambition to switch focus to custody. It would involve re-enabling some key services, allowing users that have funds in custody to stake, swap and take loans while they’re charged fees for certain transactions.&nbsp;



The plan is code-named “Kelvin,” a unit of temperature which takes <a href="https://coolcosmos.ipac.caltech.edu/ask/298-What-is-absolute-zero-" target="_blank" rel="noreferrer noopener">absolute zero</a> — equivalent to minus 273 degrees Celsius — as its lower bound. Blonstein chose to describe it as a concept of “absolute zero trust involved.”



Both executives were met with skepticism from employees, who asked how customers would trust Celsius after initially being told they wouldn’t be charged to get their money out.&nbsp;



Celsius has previously advertised its products as being <a href="https://support.celsius.network/hc/en-us/articles/360001716618-Do-you-charge-fees-" target="_blank" rel="noreferrer noopener">fee-free</a> as part of the lender’s “unbank yourself” motto.



In response, Blonstein used Binance as an example to say that several crypto businesses make revenue from charging a transaction fee on transactions.&nbsp;



“If we’re delivering valuable services, people should be willing to pay for it,” he said.



Separately, Mashinsky indicated that bankrupt companies have the potential to rebound aggressively after successful reorganization.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Pepsi filed for bankruptcy twice, right? Does it make the Pepsi taste less good?” he said. “Delta filed for bankruptcy, right? Do you not fly Delta because they filed for bankruptcy? </blockquote>



Mashinsky described filing for Chapter 11 protection as “a test to see if you should exist,” adding “or are we gonna be in the dustbin of companies that were great or almost-great or great for a while, but disappear?”



The <a href="https://www.nytimes.com/2022/09/13/technology/celsius-network-crypto.html" target="_blank" rel="noreferrer noopener">New York Times</a> first reported the news.



<h3 class="wp-block-heading">Creditors are incredulous</h3>



The revival plan is just a proposal for now. It would still have to pass Celsius’ Unsecured Creditors’ Committee (UCC) before being brought to the court for approval. However, the UCC reportedly had concerns about the Kelvin proposal after meeting with executives.



Simon Dixon, founder of Bank to the Future and a Celsius creditor, <a href="https://twitter.com/SimonDixonTwitt/status/1569948807072186368" target="_blank" rel="noreferrer noopener">called out Mashinsky</a> for his claim of UCC support, and expressed skepticism over any plan with Mashinsky at the helm.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I’ll get behind any plan that makes creditors whole so I’ll hear all plans out. Having <a href="https://twitter.com/Mashinsky?ref_src=twsrc%5Etfw">@Mashinsky</a> in charge is a magnet for regulatory shutdown and financial disaster for all creditors IMO. I will remain open minded, but ignoring this reality is not the path to recovery IMHO. <a href="https://t.co/maJBsbCLn0">https://t.co/maJBsbCLn0</a>&mdash; Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) <a href="https://twitter.com/SimonDixonTwitt/status/1569952032932380672?ref_src=twsrc%5Etfw">September 14, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Celsius’ <a href="https://cms.blockworks.co/celsius-to-file-for-bankruptcy-imminently-report/" target="_blank" rel="noreferrer noopener">bankruptcy</a> filing in July was a lesson in the risks of high-yield lending for investors. As several creditors are yet to recover their funds, the lender is working on <a href="https://cms.blockworks.co/celsius-gets-court-blessing-to-sell-its-mined-bitcoin/">monetizing </a><a href="https://cms.blockworks.co/celsius-gets-court-blessing-to-sell-its-mined-bitcoin/" target="_blank" rel="noreferrer noopener">i</a><a href="https://cms.blockworks.co/celsius-gets-court-blessing-to-sell-its-mined-bitcoin/">ts bitcoin mining business</a> to support operations. 



Celsius didn’t return Blockworks’ request for comment by press time.



As the bankrupt lender aims to turn down the heat, the case has sparked the interest of lawyers from the Federal Trade Commission, who <a href="https://cases.stretto.com/public/x191/11749/PLEADINGS/1174909132280000000085.pdf" target="_blank" rel="noreferrer noopener">filed with the court</a> to represent the government agency on Tuesday.



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Alex Mashinsky

Celsius Banks on Future With New Plan Named ‘Kelvin’

<div id="highlights-block_6315c9872f943" class="highlights">
 <ul>
 <li>Bnk to the Future is looking to bounce back after backing failed crypto lender Celsius</li>
 <li>SALT settled SEC charges in September 2020 over its $47 million token sale</li>
 </ul>
 
</div>



Crypto lender SALT is eyeing a buyout nearly two years after it was charged by the US securities watchdog for operating an unregistered initial coin offering (ICO).



Secured Automated Lending Technology (SALT), which allows users to take out crypto-backed loans, <a href="https://saltlending.com/were-excited-to-announce-a-potential-acquisition-by-bnk-to-the-future/" target="_blank" rel="noreferrer noopener">said Friday</a> it was in talks with digital asset and fintech investment platform Bnk To The Future (BF).



BF has signed a letter of intent to acquire SALT, the companies said in a statement. The deal is dependent upon inking definitive agreements and regulatory approval.



SALT said the deal would bolster its suite of products. The Denver-based lender noted customers’ loan terms, security of investments and services would remain unchanged as it seeks to hash out the terms with BF.



Blockworks attempted to contact both companies to further understand the terms of the deal but have yet to receive a response.



SALT launched in October 2017 — peak-ICO mania — as bitcoin was on its way to $20,000 for the first time. 



The startup <a href="https://www.sec.gov/enforce/33-10865-s" target="_blank" rel="noreferrer noopener">ran afoul</a> with the Securities and Exchange Commission (SEC) in September 2020, when it was charged with operating an unregistered ICO starting in June 2017, which by December of that year had raised $47 million.&nbsp;



The firm settled the charges and agreed to pay a $250,000 civil penalty and return money to investors who initiated a claims process. SALT has since become a registered entity with the SEC, which means it must now file regular financial statements. 



SALT’s native token of the same name has doubled since word of the potential acquisition first broke on Friday, trading for $0.077 — down 75% over the past year and more than 99% below its $17.22 record <a href="https://www.coingecko.com/en/coins/salt" target="_blank" rel="noreferrer noopener">high</a> posted in December 2017.



As for BF, it was founded in 2011 by former investment banker turned bitcoin backer Simon Dixon. It helps qualified investors pour money into companies, funds and other products focused on the future of finance.&nbsp;



BF was a leading investor in troubled crypto lender Celsius, which <a href="https://cms.blockworks.co/celsius-to-file-for-bankruptcy-imminently-report/" target="_blank" rel="noreferrer noopener">filed for bankruptcy</a> in July, nearly a month after it froze fund withdrawals. It&#8217;s reported that more than 1,000 BF users were exposed to Celsius&#8217; collapse, with Dixon himself one of the platform&#8217;s top depositors.



The Cayman Island-registered firm claims to have facilitated investments worth more than $1.7 billion over the years.



David Canellis contributed reporting.



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blockchain

Crypto Lender SALT in Buyout Talks, 2 Years After SEC Settlement

<div id="highlights-block_62ce7eb32f661" class="highlights">
 <ul>
 <li>Celsius is unlicensed in Vermont and provided unregistered securities offerings, the agency said</li>
 <li>The lender used customer funds in risky and illiquid investments, trading and lending, it added</li>
 </ul>
 
</div>



Troubled cryptocurrency lender <a href="https://cms.blockworks.co/tag/celsius/" target="_blank" rel="noreferrer noopener">Celsius</a> is in no position to fulfil withdrawal obligations or repay loans to creditors, according to financial regulators in Vermont.



The state’s Department of Financial Regulation “believes Celsius is deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors,” the state watchdog said in a <a href="https://dfr.vermont.gov/consumer-alert/dfr-encourages-celsius-network-investors-proceed-caution" target="_blank" rel="noreferrer noopener">statement</a> on Tuesday.



Celsius, which is unlicensed in Vermont, used customer assets in various risky and illiquid investments, trading and lending activities, the regulator said. It believes users in the state have been affected, and the company’s assets may be inadequate to cover outstanding liabilities.



The regulator said Celsius provided an unregistered securities offering to retail investors and did not have a money transmitter license. It also accused the company, CEO <a href="https://cms.blockworks.co/tag/alex-mashinsky/" target="_blank" rel="noreferrer noopener">Alex Mashinsky</a> and other Celsius representatives of making false statements about the safety of customer funds and its ability to meet obligations.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Due to its failure to register its interest accounts as securities, Celsius customers did not receive critical disclosures about its financial condition,” it added.</blockquote>



Vermont has entered a <a href="https://cms.blockworks.co/5th-regulator-investigates-beleaguered-crypto-lender-celsius/" target="_blank" rel="noreferrer noopener">multi-state investigation</a> into the lender’s dealings, joining Alabama, Kentucky, New Jersey, Texas and Washington.&nbsp;



Celsius didn’t return Blockworks’ request for comment by press time.



Simon Dixon, CEO of investment platform BnkToTheFuture, itself a Celsius shareholder, described a <a href="https://cms.blockworks.co/celsius-lost-potential-6b-bailout-after-refusing-to-show-financials-investor-says/" target="_blank" rel="noreferrer noopener">proposed recovery plan</a> for the lender on Tuesday, saying he secured up to $6 billion in liquidity to solve its troubles. He also urged Mashinsky to be transparent about the company’s finances. But the company declined the offer, and Mashinsky hasn’t made its finances public. 



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“The only reason you wouldn’t pursue [a lucrative round of investment] is there’s something else going on,” Dixon said.</blockquote>



Celsius is best known for offering high-yield returns on its crypto deposits, up to as much as 18%. That high interest was earned by lending to other institutional investors and through DeFi protocols. Its <a href="https://celsius.network/about-us" target="_blank" rel="noreferrer noopener">website</a> previously showed Celsius lent out more than $8 billion to clients and held nearly $12 billion in assets as of May, but this data appears to have now been deleted. 



The company recently <a href="https://cms.blockworks.co/celsius-hires-new-restructuring-lawyers-amid-debt-repayments/" target="_blank" rel="noreferrer noopener">replaced</a> its former lawyers Akin Gump Strauss Hauer &amp; Feld LLP, which it <a href="https://www.wsj.com/articles/crypto-lender-celsius-hires-restructuring-lawyers-after-account-freeze-11655250575" target="_blank" rel="noreferrer noopener">hired</a> in mid-June, with new ones from Kirkland &amp; Ellis — the same law firm helping <a href="https://cms.blockworks.co/tag/voyager/" target="_blank" rel="noreferrer noopener">Voyager Digital</a> in its <a href="https://cms.blockworks.co/voyager-files-for-bankruptcy-days-after-freezing-withdrawals/" target="_blank" rel="noreferrer noopener">bankruptcy</a> proceedings. A source familiar with the matter told Blockworks in an interview it’s “entirely possible” that Celsius could go into bankruptcy as well.



The cryptocurrency lender <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">froze withdrawals</a> on its platform on June 12 “to stabilize liquidity and operations” and reportedly <a href="https://cms.blockworks.co/celsius-lays-off-150-employees-as-withdrawal-freeze-drags-report/" target="_blank" rel="noreferrer noopener">laid off</a> about 23% of its workforce soon after. Celsius is also said to have <a href="https://cms.blockworks.co/celsius-clashes-with-lawyers-over-chapter-11-bankruptcy-report/" target="_blank" rel="noreferrer noopener">resisted advice</a> from its own lawyers to file for bankruptcy, claiming user support would help it avoid the laborious process. More recently, it has begun to <a href="https://cms.blockworks.co/newsletter/daily/?id=28342824" target="_blank" rel="noreferrer noopener">pay down</a> its debts to Aave and Compound to free up collateral parked in the decentralized finance protocols.



Celsius’ concentrated positions on less liquid assets such as <a href="https://cms.blockworks.co/tag/stETH/" target="_blank" rel="noreferrer noopener">stETH</a> (staked Ether) led to its liquidity crisis. This delicate situation, coupled with the <a href="https://cms.blockworks.co/tag/terra/" target="_blank" rel="noreferrer noopener">TerraUSD stablecoin meltdown</a> and an uncertain macro environment has been wreaking havoc in financial markets.



Celsius’ CEL token is down 66% from the start of May, around the time of <a href="https://cms.blockworks.co/cryptocurrency-luna-lurches-as-terra-usd-volatility-continues-erasing-billions/" target="_blank" rel="noreferrer noopener">TerraUSD’s depegging</a>. It last traded at $0.72 as of 4:00 am ET on Wednesday, data from <a href="https://www.blockworksresearch.com/assets/cel/" target="_blank" rel="noreferrer noopener">Blockworks Research</a> shows.



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Celsius

Celsius Is ‘Deeply Insolvent,’ Unable To Meet Withdrawal Obligations: Vermont Regulator

Jack Kubinec

<div id="highlights-block_62cdd83766b85" class="highlights">
 <ul>
 <li>BnkToTheFuture CEO Simon Dixon advised Celsius to follow in Voyager’s footsteps by declaring bankruptcy and making its finances public</li>
 <li>Celsius has paid a large portion of its debts to DeFi protocols Maker, Aave and Compound</li>
 </ul>
 
</div>



Simon Dixon, CEO of prominent Celsius investor BnkToTheFuture, said this morning that he secured up to $6 billion in investor liquidity to solve Celsius’ <a href="https://cms.blockworks.co/celsius-reorganizes-board-of-directors-amid-liquidity-issues/" target="_blank" rel="noreferrer noopener">liquidity woes</a> — only to watch the deal fall apart after Celsius refused to show its financial records to potential investors.



Dixon’s comments came in a <a href="https://www.youtube.com/watch?v=QCqZ1l7bolw" target="_blank" rel="noreferrer noopener">YouTube interview</a> where the early-bitcoin-adopter-turned-crypto-investor described his proposed recovery plans for Celsius, which the company declined to follow. 



Dixon advised Celsius CEO <a href="https://cms.blockworks.co/tag/alex-mashinsky/" target="_blank" rel="noreferrer noopener">Alex Mashinsky</a> to be transparent about the company’s financial situation and publicly outline a recovery plan. Mashinsky declined to make Celsius’ financial situation public.



“The only reason you wouldn’t pursue [a lucrative round of investment] is there’s something else going on,” Dixon opined.



Cash-strapped crypto lender Celsius has slowly worked to restore liquidity after pausing customer withdrawals in June. The firm has issued two statements in the past month, but neither of them indicated when withdrawals are expected to resume or how the company plans to further restore liquidity.



Dixon, whose company has tens of millions of dollars deposited in Celsius, said a potential multibillion-dollar bailout that he had proposed fell apart after Celsius refused to share its balance sheet with investors.&nbsp;



Critics have accused Dixon of plotting a hostile takeover of Celsius. Dixon denies the allegations, saying a takeover would ruin the trust his company has built in its various other crypto firm partnerships.



Celsius has been reclaiming collateral by <a href="https://cms.blockworks.co/newsletter/daily/?id=28342824" target="_blank" rel="noreferrer noopener">paying down its debts</a> to the Aave and Compound decentralized finance (DeFi) protocols in recent days. The company freed up $410 million in staked ether from Aave this morning after unlocking $172 million from the protocols on Monday. 



In a phone call, a Celsius representative declined Blockworks&#8217; request for comment and said all company statements can be found on Celsius’ blog.



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