Just two weeks after participating in an AMA event with Celsius founder Alex Mashinsky, cryptocurrency YouTuber Ben Armstrong announced that he intends to file a class-action lawsuit against the lending platform and its CEO.
On June 15, Armstrong tweeted out the legal threat and provided more details in multiple posts. His issues centered on not being able to repay the loan with existing funds on the platform and having to deposit new funds to repay:
"(Our customer representative) told us that we have enough money in our account to pay the loan. But the money in our account is not available. We have to give CELSIUS more money to pay the debt."
"Imagine an insolvent company asking you to transfer more money to them and you can't get your money back," he added.
Armstrong said he is currently sorting out all the "disclosures, documents, loan details, etc" while talking to lawyers about the best way to proceed with the class action. The co-plaintiffs are not yet on board because Armstrong has not "officially commenced operations."
BitBoy Crypto is the second most subscribed YouTube crypto account with approximately 1.45 million subscribers and mainly provides commentary on market news/events. The channel is second only to Coin Bureau, which has 2.07 million subscribers. BitBoy Crypto also has many detractors, some of whom claim that he has been paid to promote dubious crypto assets in the past.
Armstrong's perception of Celsius has changed dramatically since two weeks ago, when he participated in an AMA with Mashinsky on Celsius's YouTube channel.
"And today I'm a victim. I regret how I made it so bad," Armstrong said.
Celsius is either grappling with insolvency or experiencing severe liquidity issues from the plunge in the cryptocurrency market. On June 13, Celsius suspended withdrawals and reportedly moved around $320 million worth of assets to repay loans and avoid liquidations on decentralized finance (DeFi) platforms such as AAVE.
The problem with future litigation, however, is that if Celsius files for bankruptcy, it will trigger a provision called an "automatic stay" that would prevent creditors from chasing money owed against the company.
Celsius reportedly hired restructuring lawyers from Akin Gump Strauss Hauer & Feld to find potential solutions to its financial problems, but Armstrong said such lawyers were "primarily focused on preparing the company for bankruptcy."
"Even if Celsius files for bankruptcy, we've identified some potential workarounds that would still allow a class action (unaffected by bankruptcy). However, I'm going to have to keep this a secret for now," he said.
As far as recovering funds from Celsius is concerned, users with less than $25,000 in funds on the platform appear to have a potential option for obtaining their assets, at least in the near future. On June 15, Joshua Browder, founder of the robot lawyer "DoNotPay," tweeted a step-by-step strategy for how users can get their money back:
“As of now, these exchanges have not filed for bankruptcy protection. Therefore, they are subject to small claims court judgment. Small claims cases usually take 1-2 months. As long as this matter drags on for longer, this strategy It will work."
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