• Celsius filed for bankruptcy in July 2022
  • The company is reportedly trying to explore various ways to pay its customers back
  • One of these is by using IOU tokens

Celsius Network, a crypto lender and one of the casualties of the cryptocurrency crash, filed for bankruptcy in July 2022, but a newly leaked audio of its executives talking about the company's spectacular failure and coming up with a "Hail Mary" surfaced online, revealing the preliminary plan the company thought of to pay back its investors.

A leaked audio recording of an internal meeting among Celsius executives was shared by YouTuber and Celsius customer Tiffany Fong. As per the audio, the crypto lender wants to create an IOU cryptocurrency to pay clients back. Fong claimed to have received the leaked audio file from a "self-identified" employee who remained anonymous.

The leaked audio suggests that Celsius is considering an alternative way to repay its customers by wrapping the BTC, ETH and USDC it owes its clients into a token. Wrapped crypto tokens are crypto assets pegged to the value of another crypto or asset like stocks, shares, gold and real estate and placed on DeFi platforms.

Illustration shows Celsius Network logo and representations of cryptocurrencies

Technically, the original asset is wrapped into a digital vault and a newly minted token is created to transact on other platforms. It "represents the ratio between how much we really owe and how much we really have," Celsius co-founder and Chief Technology Officer Nuke Goldstein explained in the leaked audio.

Celsius customers will be able to redeem the IOU tokens at an unknown time, trade these tokens on the open market, or hold them until Celsius recovers. In another leaked phone call shared by Fong, Celsius executives informed employees on Sept. 8 that CEO Alex Mashinsky had shared the plan to issue the wrapped tokens with the unsecured creditors' committee, which reacted with "positive feedback."

"This is really how we resolve this, how we get out," Celsius' Chief Compliance Officer Oren Blonstein told employees, adding, "What we do in this pivotal moment can be through unprecedented, really innovative solutions and this [plan] is one of them."

Celsius' leaked plan is reminiscent of Bitfinex's recovery plan after it lost 120,000 Bitcoins from its exchange reserves in 2016 after a massive hack. Bitfinex issued debt tokens to its customers impacted by the attack. By April 2017, Bitfinex announced the 100% redemption of outstanding BFX Tokens.

"Bitfinex is pleased to announce that we will shortly be redeeming 100% of all currently issued and outstanding BFX tokens. This will be the final redemption of BFX tokens created in August 2016. After these redemptions, no BFX tokens will remain outstanding; they will all be destroyed.," the blog post said at the time.

In another leaked audio that CNBC shared, Celsius' Chief Technology Officer Guillermo Bodnar revealed the company is also working on building a transaction management system that will monitor the company's blockchain assets. The executive said the reason behind the development of this system is transparency.

"[T]ransparency reflected not just in how we communicate, but making sure that everything that is done within our platform is traceable, is auditable, end to end – we don't have anything to hide," Bodnar said.