David Little was starting to lose hope. Like thousands of other investors, he had lost a large chunk of his cryptocurrency savings — a sum that once accounted for more than half his net worth — when the experimental crypto bank Celsius Network filed for bankruptcy this summer. Then in July, Little wrote a letter to the U.S. Bankruptcy Court for the Southern District of New York, arguing that he and others who had deposited their digital currencies in a special type of Celsius account should be able to withdraw the funds, the New York Times reported. Soon he started getting calls from fellow depositors — a man who was struggling to pay rent, a woman who had lost her retirement savings. Little started a group chat that grew to include hundreds of Celsius customers. Within days, they raised $100,000 to hire the law firm Togut, Segal & Segal to press their case in court. The company’s implosion was one of the most damaging episodes of this summer’s crypto crash, a moment of reckoning that exposed the industry’s risky practices and ruined thousands of investors. Celsius customers alone lost $5 billion, and the firm’s collapse sent tremors across the digital currencies market, tanking the price of Bitcoin and Ether. Now the crash has entered a crucial new phase: a frenzied rush to recover lost funds. The effort stretches beyond Celsius, as the amateur traders who bet on a range of failed crypto projects seek compensation, file lawsuits and mobilize online. At the same time, some of the industry’s most powerful firms are examining what’s left of the distressed companies in a hunt for potential deals.
