“DO NOT file for bankruptcy”: Drew Niv warns crypto firms after Celsius’ Chapter 11

“…From now to 2025, lawyers from all sides will be feasting on the cash in the estate.”

Drew Niv

Celsius Network has filed for bankruptcy following a hell month for the crypto lender and its executive team led by Alex Mashinsky. More on how Celsius became deeply insolvent, here.

Vermont’s financial watchdog DFR announced Celsius commenced voluntary Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of New York.

The trading industry is closely watching how Celsius is dealing with its solvency issues as the firm is unlikely to be the last within the digital asset space to face such hurdles.

Every each decision at this point in time is a difficult one, with pros and cons, and Celsius chose to file for Chapter 11. There are, however, arguments against that decision.

FX industry dinosaur Drew Niv, who co-founded FXCM and is now an investor/exceutive at TradingTools, has come forward to share his knowledge and advise troubled crypto firms not to file for bankruptcy.

“A bit of peanut gallery unsolicited advice for crypto firms that are in trouble. DO NOT file for bankruptcy, make a deal any deal even one that wipes out all equity holders, etc. Bankruptcy will take years to play out meaning customers waiting for their money will be waiting till 2025 to see a few pennies from it. Reason it will be pennies is because from now to 2025 lawyers from all sides will be feasting on the cash in the estate.

“Times like these are a bankruptcy lawyer’s dream come true and on large bankruptcies like these years of fees will rob 20% plus of the estate’s funds without making any logical sensical decisions. The fact that status of crypto and customer money is not really tested in courts might make this a 2028 affair.

“If you think I am exagerating look at high profile financial bankruptcies. Lehman Brothers took nearly 14 years to resolve Refco which is more the size of voyager/celsius and others took 5 years for customers to get their money back (21 cents on the dollar for retail FX customers). Distressed deals are always predatory. Been on both sides so am an expert, take the deal and move on, your days as founders/management are over, go start fresh.”

Drew Niv’s FXCM faced its own nightmare following the Swiss peg flash crash in January 2015. The broker was banned from the United States and its former parent company, Global Brokerage, Inc. filed for bankruptcy on December 11, 2017, coming into effect in February 2018.

Global Brokerage shareholders lost over 98% of their investment since January 2015 and FXCM Group is now owned by Jefferies through its subsidiary Leucadia.

FXCM was banned from the United States and sold its 40,000 US customer accounts to Gain Capital (now part of StoneX Group) at about $375 each.