– Chapman Shallcross had been burned before. Father of current Bachelorette contestant Zach Shallcross, he spent 34 years in the fire service, retiring from his job as a fire captain for the city of Orange, Calif., after health issues caught up to him in 2020.
– The elder Shallcross considers himself a hands-on, blue-collar kind of guy, but when his reality-star son tipped him off to the world of cryptocurrencies, he quickly became fascinated by the technologys potential.
– Now the elder Shallcross is one of nearly 1.7 million people around the globe whose assets are frozen in the Celsius Network, a cryptocurrency lender that promised to be safer than a bank.
– Celsius froze more than $4 billion in assets June 12. A month later, it filed for Chapter 11 bankruptcy protection, making it one of a handful of crypto firms to implode during the latest market crash.
– Many in the cryptosphere are referring to the downfall of Celsius, Voyager and Three Arrows Capital as a Lehman Brothers moment for the industry, a nod to the investment bank that collapsed during the 2008 subprime mortgage crisis.
– Shallcross began investing in cryptocurrencies in 2018. He started slowly, but after he retired in 2020, he pulled all of his retirement savings out of his state-run CalPers account and bought Ethereum and Cardano, two cryptocurrencies.
– Shallcross first held his crypto on the exchange BlockFi but in December 2021 he transferred it to the Celsius Network, which was promising a yield-earning program with returns as high as 17%. He planned for the investment to sit in his Celsius account for about five to seven years before he took it out.
– But on June 12, he discovered that he was suddenly unable to withdraw funds from his Celsius account. He has more than $400,000 locked in his Celsius account.
– Celsius was founded in 2017 by Alex Mashinsky. Wearing a black T-shirt with Banks are not your friends written on it, Mashinky hosted weekly ask-me-anything sessions with Celsius customers.
– Mashinsky claimed Celsius was able to achieve high returns for customers by operating similarly to a bank. Users could deposit various cryptocurrencies or the U.S. dollar into Celsius. Celsius then loaned the assets to financial institutions willing to pay high interest rates on the short-term loans.
– This was called the Earn Service for Celsius users. Celsius urged international users to take the interest payment in the form of their own cryptocurrency, the CEL token, for a higher return.
– CEL is not legally traded in the U.S. In the terms and conditions for the Celsius Network, users were not simply depositing their money like they would in a bank. Technically, they were loaning digital assets to Celsius,