Some cryptocurrency investors are on the brink of financial collapse after being trusted by two unregulated cryptocurrency markets that went bankrupt.
Many put their savings into virtual currency only to see their money frozen while the courts decide the fate of their investment.
Their plight has led members of Congress to demand investor awareness and increased regulation.
Senators Debbie Stabeno, of Michigan, and John Bozeman, Senator, introduced a bill Wednesday to give the Commodity Futures Trading Commission new tools and powers to regulate digital commodities.
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The new laws will come too late for Celsius Network and Voyager Digital customers.
One investor, Donald, said he was “completely ashamed and embarrassed” for sinking $31,000 into Voyager Digital Holdings.
“Losing this money with no end in sight was unbearable for my family and I,” Donald said. “I get up most nights and walk up and down the stairs thinking about my mistakes and wondering if this will ever be over.”
John Dalisay, who is paralyzed from the neck down, sent a letter to the judge saying he was depressed and unable to work after his savings were frozen.
“I have already suffered a tragic loss of my ability to walk again and have done my best to be strong and fight to start my life over,” Dalisay wrote. “I feel humiliated and defeated.”
Dalisay invested money from his $8-an-hour job at Celsius Network.
He wrote, “I don’t ask for luxuries, your honor.” “I just wanted to be able to afford the basic necessities. Please help me be healthy again because this centigrade-created situation is wreaking havoc on my mental health.”
Voyager customers asked the judge to unfreeze their accounts. A hearing on this motion is scheduled for today.
Crypto lender Celsius and crypto broker Voyager Digital filed for Chapter 11 bankruptcy in July, freezing their clients’ assets. Celsius has 1.7 million customers and $6 billion in assets. Voyager has 3.5 million users and over $5.9 billion in crypto assets.
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Corporate bankruptcies are generally considered battles between rival groups of Wall Street investors backed by lawyers who often charge $1,000 or more an hour.
The Celsius and Voyager cases are exceptions. Every day, investors flood the courts with desperate pleas to demand their money back.
“There is rarely enough money to cover an investor,” said Melanie Center Lubin, president of the North American Securities Administrators Association, who testified last week at a Senate Banking Committee hearing on cryptocurrency fraud.
“If these investors are considered unsecured creditors, they will be placed in the group with everyone else, usually at the end of the line.”
Safer than a bank?
Celsius and Voyager promoted the safety of their investments.
“Centennial overwhelmingly mentioned… that putting our money in it [their] Trusteeship was safer than keeping it in a regular bank account,” wrote Paul Nehy, who has transferred his retirement savings to cryptocurrency.
Ryan Hourigan invested a portion of his salary in Voyager each month as well as putting his life savings into his account.
“I used Voyager to replace my savings account as it was declared as FDIC insured,” Horrigan said. “I now feel sorry for doing that and am afraid to lose almost everything to trust this company.”
“They’ve made amazing claims, like offering up to 20% interest while claiming that they are FDIC insured and that rates are safer than banks,” Senator Elizabeth Warren, Democrat of Massachusetts, said at last week’s hearing. “No risks. Twenty percent return. That was a lie from the start.”
They make amazing claims, such as offering up to 20% interest while claiming to be FDIC insured and quoting, “Safer than banks.”
The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve have ordered Voyager to stop making false and misleading statements about the FDIC’s deposit insurance status and to take immediate corrective action.
The percentage score allowed customers to get real dollar loans using their crypto holdings as collateral. Customers can also earn interest by lending their deposited coins, according to the company’s white paper.
The company’s white paper said that Voyager offered a secure way to trade over 100 different crypto assets using a mobile app and advertised rewards on over 40 cryptocurrencies.
At least one person has turned to crowdfunding for help. Eduardo Durance wants to save his family’s animals through the GoFundMe campaign. His family is a month away from losing a job.
Cryptocurrency investors who have used other platforms are not immune to losses.
Cryptocurrencies have lost an estimated $2 trillion in value since they peaked last year in a market crash dubbed “crypto winter.”
Bitcoin, the largest cryptocurrency, topped $68,789 per coin on November 10, 2021, before dropping to $17,709 on June 18, according to CoinMarketCap data.
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“It is very important for people to understand how a particular investment works, how they can lose money on an investment, what they are paying for that investment, and what recourse they have,” said Jerry Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority. .
“When this happens outside the realm of regulation, it can be difficult for investors to turn to.”
Walsh testified in the Senate hearing.