The collapse of the experimental cryptocurrency bank Celsius Network was one of the main drivers of this spring’s crypto crash, which erased nearly $1 trillion from the market and ruined thousands of investors.
Celsius filed for bankruptcy in July. Now it’s angling for a comeback.
At a meeting with employees on Sept. 8, Alex Mashinsky, the chief executive of Celsius, outlined an audacious plan to revive the firm, according to a recording of the event shared with The New York Times. He and Oren Blonstein, another Celsius executive, said they hoped to rebuild the company with a focus on custody — storing people’s cryptocurrencies for them, and then charging fees on certain types of transactions. They said the project was code-named Kelvin, after the unit of temperature.
Mr. Mashinsky, 56, faced skeptical questions from employees. He compared the rebuilding process to corporate turnarounds at some of the world’s most famous brands, including Pepsi, which went bankrupt in 1923 and 1931.
“Does it make the Pepsi taste less good?” Mr. Mashinsky asked employees. “Delta filed for bankruptcy. Do you not fly Delta because they filed for bankruptcy?”
A recording of the meeting was sent to Tiffany Fong, a Celsius customer who has made YouTube videos about the springtime crash. She shared the recording with The Times, which confirmed its authenticity.
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In a statement, a Celsius spokeswoman said the company regularly held internal meetings to “prepare for all scenarios.”
“Our employees are central to our efforts,” the statement said. “We will continue to rely on them to assist in preparing whatever requirements would be necessary to execute the final recovery plan as quickly as possible.”
Celsius is attempting a revival at a moment of transition for the crypto industry, as start-ups whose reckless practices triggered the downturn try to regroup. In recent months, other instigators of the crash — including Do Kwon, the trash-talking founder of the failed cryptocurrency Luna — have also pursued fresh crypto ventures.
Celsius rose to prominence with a marketing promise that proved impossible to sustain: Deposit your digital assets and receive interest as high as 18 percent. The company also let customers take out loans using their deposits as collateral and participate in “staking,” an investment maneuver that allows users to earn rewards on crypto holdings. In 2021, Celsius controlled assets worth $20 billion and had one million customers.
But Celsius generated its high returns by making risky investments that quickly turned sour when the crypto market crashed. Tens of thousands of customers still have digital assets trapped on the platform. In court this summer, Celsius reported that it owed customers $4.7 billion.
Celsius’s fate is not really in Mr. Mashinsky’s hands. Any proposal would require approval by the federal bankruptcy judge in New York, Martin Glenn, who is overseeing the process. The outcome could take a number of forms, such as a buyer purchasing parts of the company.
At the employee meeting, Mr. Mashinsky said Celsius was working with a legal entity representing the company’s creditors — a group known as the Committee of Unsecured Creditors, or U.C.C. — to devise a plan to restart operations.
“Most of our community, including the U.C.C., has asked us to continue services,” he said. “They think that these services are valuable, and they want to continue using the loans and the staking and the custody and things like that.”
But after meeting with Celsius representatives, the committee had concerns about Mr. Mashinsky’s continuing involvement in the company and major questions about the feasibility of the Kelvin proposal, according to a person with knowledge of the matter.
Lawyers for the committee declined to comment.
The exact details of Celsius’s plan to restart remain unclear. The company has a Bitcoin mining operation, which could become part of the reorganized business. But at the meeting, Mr. Mashinsky and Mr. Blonstein focused on the possibility of storing crypto assets for Celsius’s users. Mr. Mashinsky said he could imagine charging customers a fee for access to a special, highly secure crypto wallet.
“If the foundation of our business is custody, and our customers are electing to do things like stake somewhere or swap one asset for the other, or take a loan against an asset as collateral, we should have the ability to charge a commission,” Mr. Blonstein told employees.
Since Celsius filed for bankruptcy, customers have scrambled to get their crypto assets back, raising money to hire lawyers and plotting strategy in Telegram group chats. At the meeting, Mr. Blonstein said the company was planning a “unique crypto solution” to compensate customers, but he declined to go into the details.
Mr. Blonstein also said Celsius was at a crucial point in a “hero’s journey” toward redemption.
“This hero has a mission — something that they want to accomplish. They experience an initial success, they stumble, fall short in some way and have this dark moment,” he said. “If we are successful, it’s going to be a success story like one that’s never been seen before.”
Even Apple, Mr. Mashinsky said, once considered bankruptcy as an option.
“Are we going to be in the dustbin of companies that were great or almost great or great for a while but disappear?” he said. “The community is behind us.”
Kitty Bennett contributed research.