Finance

Bitcoin surged as high as $23,800 Wednesday, up 8% in 24 hours and trading at levels not seen since mid-June.
Traders took comfort from the prospect of a rate hike from the Federal Reserve that is less aggressive than feared.
Ether climbed above $1,500 amid optimism over a highly anticipated upgrade to its network known as the “Merge.”

The world’s largest cryptocurrency is down roughly 50% since the start of 2021.
CFOTO | Future Publishing | Getty Images

Bitcoin broke the $23,000 threshold for the first time in more than a month, as hopes of a rate hike less aggressive than feared from the Federal Reserve triggered a relief rally in cryptocurrencies.
The the world’s biggest cryptocurrency surged as high as $23,800 Wednesday, up 8% in 24 hours and trading at levels not seen since mid-June. It was last trading at a price of $23,330.80, according to Coin Metrics data.

Traders took comfort from the prospect of softer policy action from the Fed at its next rate-setting meeting.
The effects of tighter monetary policy from the U.S. central bank have weighed heavily on risky assets like stocks and crypto.
Bitcoin is still down roughly 50% since the start of 2021.
“This isn’t necessarily the end of the crypto bear market, but a relief rally for Bitcoin is long overdue,” said Antoni Trenchev, CEO of crypto lender Nexo.
“Bitcoin is beginning to find its feet after a shaky month, and the next week will be telling,” Trenchev said.

The U.S. central bank is expected to hike rates again at its next policy meeting, but economists are forecasting a less aggressive increase this time of 75 basis points rather than 100.
Cryptocurrencies were touted as a source of value uncorrelated with traditional financial markets. But as institutional capital poured into digital assets, that thesis failed to materialize once the Fed began hiking interest rates and traders fled equities.
A rally beyond $22,700 means the cryptocurrency has now recovered its 200-week moving average, laying the technical groundwork for a “trend reversal,” according to Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank.
“The market needs a little more assurance for deceleration in the pace of rate hike by the Fed,” he said. “Nevertheless, a short-term outlook for bitcoin is bullish and it could go as high as around $29k this week.”
Meanwhile, traders are betting that the worst of an intense market contagion caused by liquidity issues at some large crypto firms has likely subsided.

Digital currencies have been under immense selling pressure in the past couple of months, as the collapse of some notable ventures caused ripple effects in the market. Terra, a so-called algorithmic stablecoin, plunged to near-zero in May, setting off a chain of events that ultimately led to the bankruptcies of crypto firms Celsius, Three Arrows Capital and Voyager.

Ethereum ‘Merge’

Elsewhere in crypto, ether climbed more than 1% to $1,543.76, while other so-called “altcoins” were also higher.
The second-largest token is up more than 40% in the past seven days, fueled by optimism over a highly anticipated upgrade to its network known as the “Merge.”
Developers now expect the update, which would move ethereum away from environmentally dubious crypto mining to a more energy-efficient system, to be completed by Sept. 19.
“Crypto mining has been highly criticised for contributing to climate change due to its energy intensive nature and as wildfires rage across Europe and the United States, the promise that Ether transactions could be less damaging to the environment has caused a wave of interest,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

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U.S. stock futures edged higher on Tuesday after a sharp rally for the three major indexes during the regular trading session.
Dow Jones Industrial Average futures rose 12 points, or 0.04%. S&P 500 and Nasdaq 100 futures climbed 0.16% and 0.32%, respectively. Netflix surged more than 7% in after-hours trading after saying it lost only 970,000 subscribers in the second quarter, less than the 2 million it had previously projected.

Traders betting that markets found a bottom and will be pushed forward by stronger-than expected corporate earnings drove stocks higher Tuesday, with all three major indexes trading above their 50-day moving averages for the first time since April.
The Dow rallied 754.44 points, or 2.43%, while the S&P 500 gained 2.76%. The Nasdaq Composite rose 3.11%.
Bank of America’s latest survey of professional investors showed that deteriorating investor sentiment has potentially set up a buying opportunity in the market. The U.S. dollar, which recently surged to a 20-year high against the euro, softened, giving the rally more steam.
Earnings also drove gains, with bank stocks such as Goldman Sachs and Bank of America ending the day higher following positive results. Both banks reported on Monday. Shares of Halliburton and Hasbro gained after beating earnings expectations.
“This was a broad rally today and some of it is just lower dollar, lower commodity prices, better reopening dynamics – and we saw that across the board,” Tim Seymour, founder and chief investment officer of Seymour Asset Management, on CNBC’s “Fast Money” Tuesday.  
More earnings reports are on deck for later in the week. Companies including Tesla, United Airlines, American Airlines, Snap, Twitter and Verizon are scheduled to report in coming days.

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IBM CEO Arvind Krishna appears at a panel session at the World Economic Forum in Davos, Switzerland, on May 24, 2022.
Hollie Adams | Bloomberg | Getty Images

Check out the companies making headlines in midday trading Tuesday.
IBM – Shares of IBM slipped 5.25% after the tech company warned of a potential $3.5 billion hit from a strong U.S. dollar. That warning overshadowed better-than-expected earnings and revenue for the previous quarter.

Boeing – Shares of the aerospace giant rose 5.69%, continuing an upward trend for the stock, after Boeing announced several deals for plane orders. The deals include an order for five 787 Dreamliners from AerCap and orders for 737 Max jets from Aviation Capital Group and 777 Partners. Shares of Boeing are up more than 10% in July.
Chipmakers – Semiconductor stocks jumped ahead of a key Senate vote on the CHIPS act, which could come as early as Tuesday. The legislation would give domestic chip makers $52 billion in government subsidies. Marvell Technology rose 7.12%, ASML Holding gained 5.24%, Applied Materials gained 5.24% and Advanced Micro Devices increased 5.46%. Intel, Qualcomm and Nvidia jumped 3.9%, 4.01% and 5.53%, respectively.
Goldman Sachs — Goldman Sachs shares rose 5.57% to lead the Dow Jones Industrial Average higher, building on the bank’s post-earnings gains. Other bank stocks traded higher alongside Goldman. Bank of America advanced 3.38%, while JPMorgan Chase climbed 2.48%.
Travel stocks – Cruise line and airline stocks surged as investors continue to debate consumer health and the potential for a recession — while travel demand remains strong. Royal Caribbean, Carnival and Norwegian Cruise Line gained 5.76%, 7.36% and 3.6% respectively. United, Delta and American all traded more than 3% higher, while Southwest advanced 3.71%.
Hasbro –Shares of Hasbro rose 0.71% after the company reported earnings per share that beat Wall Street’s forecast. The toymaker’s revenue was slightly less than analysts expected. Hasbro’s bottom line was driven in part by strong demand for tabletop games and higher prices.

Halliburton – Halliburton shares rose more than 2.11% on the back of better-than-expected quarterly earnings and revenue. The oil services company posted earnings per share of 49 cents on revenue of $5.07 billion. Analysts polled by Refinitiv expected a profit of 45 cents per share on revenue of $4.71 billion.
Ford –Shares of Ford jumped 5.27% on Tuesday. A day earlier, the company unveiled the F-150 Raptor, its latest pickup truck. The truck is the most powerful, with 700 horsepower, and the most expensive, starting at $109,000.
Exxon Mobil – Exxon Mobil rose 2.52% after Piper Sandler upgraded the company to overweight from neutral and said the stock has room to gain another 25%. The firm anticipates strong second-quarter results from the company.
— CNBC’s Samantha Subin and Jesse Pound contributed reporting

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Airlines are contending with increased travel demand and a shortage of workers, contributing to more lost and delayed luggage.
Travelers have financial recourse in these situations. The rules may differ according to airline and whether a trip is domestic or international.
Here’s what to know and steps to take before a trip to alleviate potential headaches.

Tim Boyle | Getty Images News | Getty Images

Air travel has been rocky this summer — and baggage problems factor among many other issues for travelers like flight cancellations and delays.
Nearly 220,000 bags were “mishandled” by U.S. airlines in April 2022, meaning they were lost, damaged, delayed or stolen, according to the most recent data published by the U.S. Department of Transportation.

The number of mishandled bags in April was more than double the roughly 94,000 cases of mishandled luggage in April 2021, though slightly less than the tally in March 2022 and the level in April 2019, before the Covid-19 pandemic, according to department data.
More from Personal Finance:The euro hit parity with the U.S. dollar for first time since 2002These 10 U.S. real estate markets are cooling the fastestHow inflation hurts and helps consumers
What do those numbers look like for travelers? Consider this: Last week, Delta Air Lines flew a plane filled with 1,000 pieces of stranded luggage — and zero passengers — from London’s Heathrow Airport to Detroit to expedite movement of delayed bags.

Why airlines are struggling to manage baggage

Airlines have contended with a shortage of baggage handlers, pilots and other staff as travel demand has ramped up, after having pared back at the onset of the pandemic. More than 2.4 million Americans passed through airport security on Sunday, an increase of 10% from a year ago and more than triple the same day in 2020, according to the Transportation Security Administration.
While a lost bag or a delay in accessing your belongings can sour an otherwise amazing trip, there’s a silver lining: Travelers can, in many circumstances, get financial compensation from airlines when their bags go missing. There are also steps to take before flying to make the process easier.

“Passengers do have recourse,” said Sara Rathner, a travel expert at NerdWallet.
Here’s what to know if your checked luggage goes MIA or comes back with a few dents.

Airlines must compensate passengers for lost bags

Nicolas Economou/NurPhoto via Getty Images

Per U.S. regulations, airlines must compensate passengers for lost, delayed or damaged luggage, up to a limit.

If your bag is declared lost: The airline must compensate you for the bag’s contents, subject to depreciation, up to a preset maximum. That maximum liability is $3,800 for domestic flights and about $1,800 for international flights, according to the Transportation Department. (Airlines can pay more but aren’t required to.) The carrier must also refund any fees paid for checking the bag. Airlines are also on the hook for up to another $20,000 for a lost or damaged “assistive device” for a traveler’s disability, including crutches, walkers, wheelchairs, hearing aids or prosthetics, for example.
If your bag is delayed: Those maximum liability limits also apply to delayed bags. Payment to travelers may include out-of-pocket costs for additional clothing or other purchases they make out of necessity due to the delay. These are called “reasonable, verifiable, and actual incidental expenses” incurred while a bag is delayed. Airlines aren’t allowed to set a daily cap for these interim expenses (up to $50 a day, as an example).

“The financial compensation is helpful, because that’s not money you’d have spent ordinarily,” Rathner said.
Policies can vary from carrier to carrier. For example, airlines have different time standards for when a bag is deemed “lost”; most declare a bag lost after five to 14 days, according to the Transportation Department. Airlines may ask for receipts or other proof for items in your bag.
Airlines may also exempt certain items from repayment, including cash, electronics and fragile items.

Make the lost luggage desk your ‘first port of call’

Patrick T. Fallon | Afp | Getty Images

If the baggage carrousel is empty and you haven’t reunited with your bag, talk to an airline employee before leaving the airport to file a baggage claim, according to travel experts.
“For lost luggage, the first port of call has to be the airport’s lost luggage desk to report the matter,” said Aiden Freeborn, senior editor at travel site The Broke Backpacker.
Airlines are responsible for locating a checked bag that doesn’t arrive where and when it should.
“In some cases, they may be able to locate where the item is and arrange for it to be forwarded,” Freeborn said. “Unfortunately, this may mean waiting a few days, and having to return to the airport to collect it.”

Airlines vary in terms of accepting liability and in turnaround times for claims, he added.
The same advice applies to a delayed bag, a damaged bag or bag contents — file a report before leaving the airport. Relative to a damaged bag, the airline may be able to argue damage occurred after leaving the premises, experts said.
After departing the airport, travelers should also file a complaint with the Transportation Department, according to Charlie Leocha, chairman of Travelers United, an advocacy group. The agency will forward your complaint to the airline, thereby helping put yours toward the top of the queue, he said.

How to pack to reduce your odds of a baggage mishap

Adene Sanchez | E+ | Getty Images

There are things travelers can do before flying to reduce their chances or losing a bag — or decreasing any headaches that may result if they do, according to experts.
Perhaps the most obvious — yet impactful — tip is to avoid checking a bag when possible.
“Right now, if you could always travel with a carry-on; that’s my No. 1 rule for you,” Leocha said.
Of course, that’s not always possible. If you need to check a bag, consider booking a nonstop flight instead of a multi-leg trip (again, if possible) to eliminate any baggage errors that may accompany switching planes. If a layover is necessary, opt for a longer one to ensure there’s enough time for your bags to transfer.
Don’t put anything valuable, like jewelry or camera equipment, in a checked bag: Those are unlikely to be covered if lost. It’s also better to keep trip necessities like certain clothing or medical prescriptions in your carry-on, if those being delayed or lost would affect your health or make it impossible to enjoy your trip.

“Travelers would be wise not to put all their eggs in one basket — instead it is worth spreading items out across bags,” Freeborn said in an email. “Personally I always take a few days’ worth of clothes and underwear in my cabin bag just in case my luggage is lost.”
Experts also recommend taking photographs of what you pack (an easy task with cellphone cameras) and writing down the value of anything for which you paid in cash during a trip. These steps will help in the event you need to file a baggage claim and list your personal belongings and their cost to the airline, Leocha said.
Additionally, some travel insurance policies may cover costs associated with lost, stolen, damaged or delayed luggage, experts said. Buying an insurance policy may not be necessary though; travel-oriented credit cards used to fund a trip may already carry certain protections related to luggage.   
Travelers can also consider shipping certain must-have items to a destination ahead of time — though it will almost certainly cost more money and airlines won’t pay for it, Leocha said.

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Take a look at some of the biggest movers in the premarket:
IBM (IBM) – IBM slid 5.9% in premarket action despite beating top and bottom line estimates for the second quarter. IBM warned of a $3.5 billion impact to earnings because of the strong U.S. dollar.

NCR (NCR) – NCR surged 11.5% in the premarket after The Wall Street Journal reported that private-equity firm Veritas Capital was in exclusive talks to buy the financial technology provider.
Cinemark (CNK) – The movie theater operator’s stock gained 4.6% in premarket action after Morgan Stanley upgraded it to “overweight” from “equal-weight.” Morgan Stanley said the return of consumers to theaters represents a trend not reflected in the stock’s price.
Halliburton (HAL) – The oilfield services company’s stock rose 1.8% in the premarket after beating top and bottom line estimates for the second quarter. Profit was up nearly 41% from a year earlier as the jump in oil prices spurred a significant increase in drilling demand.
Johnson & Johnson (JNJ) – The health-care company reported quarterly profit of $2.59 per share, 5 cents a share above estimates. Revenue beat forecasts as well. J&J cut its full-year guidance, however, due to the strength of the U.S. dollar rather than operational issues.
Hasbro (HAS) – The toy maker topped estimates by 21 cents a share, with quarterly earnings of $1.15 per share. Revenue was very slightly below forecasts. Hasbro said it continues to take steps to cut costs, and to ensure that it has sufficient holiday season inventories.

Boeing (BA) – Boeing is near a deal to sell a small number of 787 Dreamliners to aircraft leasing company AerCap Holdings. Boeing added 1.3% in premarket action.
Truist Financial (TFC) – The banking company’s stock gained 1.9% in premarket trading after reporting better-than-expected profit and revenue for its latest quarter. Truist said its results reflected strong loan growth and an expansion of its net interest margins.
Sunrun (RUN), Sunnova Energy (NOVA) – Piper Sandler downgraded both solar company stocks to “neutral” from “overweight,” noting both the failure of President Joe Biden’s “Build Back Better” program to pass Congress as well as cash flow prospects in a potentially recessionary environment. Sunrun fell 3.3% in premarket trading, while Sunnova lost 2.8%.

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Celsius had a range of internal failures during the years leading up to its recent liquidity issues, according to former employees and internal documents reviewed by CNBC.
Employees who spoke with CNBC painted a picture of risk-taking, disorganization and alleged market manipulation.
“The biggest issue was a failure of risk management,” said one former employee.

Problems at Celsius appear to have been simmering for years before the crypto lender filed for bankruptcy.
The crypto company saw a range of internal missteps leading up to its recent turmoil, according to former employees and internal documents CNBC reviewed. Multiple employees painted a picture of risk-taking, disorganization and alleged market manipulation.

“The biggest issue was a failure of risk management,” Timothy Cradle, Celsius’ former director of financial crimes compliance, told CNBC in an interview. “I think Celsius had a good idea, they were providing a service that people really needed, but they weren’t managing risk very well.”
The Hoboken, New Jersey-based company made headlines a month ago after it froze customer accounts, blaming “extreme market conditions.” It had attracted 1.7 million customers and $11.8 billion in deposits as of June. Celsius customers have told CNBC they were drawn in by a 17% yield the company was offering on crypto deposits.
Behind the scenes, Celsius would lend that money out to hedge funds and others willing to pay an even higher yield. It would also invest in other high-risk cryptocurrency projects, according to internal documents. Celsius would later split those profits with the customer. The model came crashing down along with the price of cryptocurrencies, which caused multiple companies to freeze assets and at least three to file for bankruptcy.
Cradle said he was part of a three-person compliance team between 2019 and 2021. The role required him to apply international finance laws to Celsius’ business. But resources were limited, he said.
“The compliance team was too small,” Cradle said. “Compliance was a cost center — basically we were sucking out money and not bringing any back in. They didn’t want to spend on compliance.”

One of the internal company documents CNBC obtained echoed this claim. It said when it came to assessing fraudulent cryptocurrency platforms, “there is not adequate compliance staff for the amount of users on Celsius’s platform as there are only 3 full-time individuals.”

‘Banks are not your friends’

Cradle said he was especially alarmed by conversations at a Celsius Christmas party in 2019 about a cryptocurrency created and used by Celsius, called the “cel” token. Executives said they were “pumping up the cel token” and “actively trading and increasing the price of the token,” Cradle said.
“They weren’t shy about it. They were absolutely trading the token to manipulate the price,” Cradle said. “It came up in two completely different conversations for two completely different reasons.”
Celsius, CEO Alex Mashinsky and company lawyers did not respond to multiple requests for comment.

Celsius on Thursday was sued by former investment manager Jason Stone, as pressure continues to mount on the firm amid a crash in cryptocurrency prices. Stone has alleged, among other things, that Celsius CEO Alex Mashinsky (above) was “able to enrich himself considerably.”
Piaras Ó Mídheach | Sportsfile for Web Summit | Getty Images

Celsius was by far the largest holder of cel tokens. But it was also a buyer, according to blockchain data firm Arkham. The firm estimated that Celsius spent $350 million acquiring tokens on exchanges over the past three years, despite already having billions worth in its own treasury. At the same time, top executives were selling. Accounts associated with Alex Mashinsky appear to have sold or “swapped” roughly $40 million, according to Arkham.
Cradle and other employees received part of their salary in cel tokens. A former human resources employee said it was a way to attract and retain talent. It also let them share in the company’s financial upside — similar to the appeal of equity in a fast-growing start-up. The token started to spike in early 2020 and the following year hit a high of almost $8. It was trading under $1 as of July.
Celsius’ CEO was an outspoken booster of the token. He gave weekly YouTube updates often touting the benefits or “tokenomics” of the project. Mashinsky was also known to criticize Wall Street banks. He frequently wore a black T-shirt during public appearances that said: “Banks are not your friends.”
Another former Celsius employee, who asked not to be named, said while Mashinsky was inducing average investors to buy the cryptocurrency, he was selling behind the scenes.
It wouldn’t take much to move the price of the token because the volume was relatively small, the former employee said. Mashinsky was selling millions behind closed doors without any public disclosures, according to the former employee.
“It’s easy to manipulate the price of cel due to the low trading volumes in cel. I’m sure [Mashinsky] knows that,” the former employee said. “That’s just an example of what he will do to publicly manipulate the price for his own benefit.”
The former employee’s allegations echo a recent lawsuit brought by a former investment manager, Jason Stone. Stone alleges that Celsius artificially inflated the price of its own token and was “actively using customer funds to manipulate crypto-asset markets to their benefit.” The suit also claimed Celsius failed to hedge risk and engaged in activities that amounted to fraud.

Details within internal documents

Other internal documents shine light on some of the risk Celsius appeared to be taking with customer funds. Lenders such as Celsius and hedge funds were able to achieve high returns by investing in “decentralized finance,” or DeFi, projects. Celsius has its own cryptocurrency and relied on high yields to attract more borrowers. According to internal documents, Celsius was investing customer funds in multiple DeFi projects. All were labeled medium to high risk.
On Wednesday, Vermont became the sixth state regulator to launch an investigation into Celsius and pointed to that investment strategy. The state’s Department of Financial Regulation said Celsius “deployed customer assets in a variety of risky and illiquid investments, trading, and lending activities.”
“Celsius customers did not receive critical disclosures about its financial condition, investing activities, risk factors, and ability to repay its obligations to depositors and other creditors,” the Vermont regulator said in a statement.
Cradle also said that many Celsius users likely didn’t have a good grasp of the company’s terms of use, which contradicted the messaging that Celsius communicated through its marketing.
But the risks associating with depositing funds with Celsius were “hiding in plain sight,” Cradle said. Section 13 of the company’s terms of use says that once a customer deposits funds, the funds belong to Celsius.
Cradle also said he saw evidence of the company trading customer funds without disclosing that it was doing so. Celsius’ CEO has said explicitly on Twitter that the company did not trade customer funds.

Arrows pointing outwards

Cradle said that based on his firsthand experience with the company’s risk appetite he wouldn’t keep his own money with Celsius.
“I didn’t feel comfortable leaving them on the platform,” Cradle said, referring to his own crypto funds. “I frequently read the terms of use — once you deposit your assets with Celsius, they belong to Celsius, and Celsius can keep them if they need to or want to.”
Internal documents also show evidence of disorganization across multiple teams. One document shows policies written by a team without the head of that team knowing. In one instance, a top risk officer writes that he was “surprised” by a document written by another team overseas.
“He was probably surprised that the document even existed — that’s just the way things were at Celsius. It’s left hand not knowing what the right hand is doing,” Cradle said. “It’s just another example of mismanagement or sort of sloppy management on Celsius’ part.”

Lacking transparency

One area in which Cradle said Celsius lacked transparency was its number of accounts. While Celsius reported 1.7 million users, Cradle said that number is inflated.
“It’s probably closer to 300,000, because the amount of fake accounts was so vast and there was nothing the management team was willing to do to really stop people from doing that,” he said.
In addition to this alleged discrepancy, Mashinsky’s own Twitter posts show a contrast between the messages he conveyed to customers and what was transpiring behind the scenes.
The day before the withdrawal freeze, in response to a tweet that questioned the company’s financial health, Mashinsky wrote: “do you even know one person who has a problem withdrawing from Celsius? why spread FUD and misinformation,” referring to fear, uncertainty and doubt. The following day, June 12, customers were no longer permitted to withdraw funds from their accounts.
Public records indicate Celsius may have had financial problems long before this.
Data from the federal government shows Celsius received a Paycheck Protection Program loan worth $281,502 in April 2020. The federal government awarded these loans to businesses negatively affected by the Covid pandemic.  
“That raised my eyebrows a bit, and I was curious if we were profitable,” Cradle said.
The loan was forgiven by the federal government, meaning that Celsius met the requirements needed to avoid repayment.

Background checks

Risk-taking also showed up in the Celsius hiring process. Nikki Goodstein, a former senior member of the human resources team, said she was not aware of any background checks at the company when she joined in May 2021.
She told CNBC that executives specifically told the chief human resources officer not to run a background check on Yaron Shalem, the incoming chief financial officer. In November 2021, Shalem was arrested in Israel and charged with money laundering in connection with his previous company. Shalem did not respond to requests for comment.
CNBC also made an attempt to find out the status of the case, but it does not appear to be publicly available in the Israeli court system. The chief human resources officer who Goodstein said was told not to run a background check did not respond to CNBC’s request for comment.
Goodstein, who worked at publicly traded Fortune 500 companies before Celsius, said she was “surprised” someone in an executive role wouldn’t face a background check.
“It was definitely a gap in process at that time,” she said. “Everyone was [upset] that he wasn’t background checked, because then it wouldn’t have brought such embarrassment to the company if that was a process that we had in place — we all were kind of like, what the heck just happened?”
Cradle said he’s not planning to go back to the cryptocurrency industry after Celsius and a stint at another start-up. Celsius set out to make a good product at a time when banks paid near zero interest on savings, he said.
“I think it was good people with poor planning — they didn’t hire at the right times, they didn’t staff up at the right times, they didn’t scale with the growth of the company,” he said. “It was just a bunch of mistakes that are ending up very tragically.”
— Érica Carnevalli and Margaret Fleming contributed to this article.

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Crypto platforms Celsius and Voyager filed for bankruptcy protection after suspending account withdrawals.
The debacle raises questions about what happens to investors’ funds when an exchange ends up failing.
Traders hoping to recoup some or all of their holdings anytime soon are likely to end up disappointed, according to legal experts.

Bankruptcy filings from Celsius and Voyager have raised questions about what happens to investors’ crypto when a platform fails.
Rafael Henrique | Sopa Images | Lightrocket | Getty Images

Traders hoping to recoup their funds from failed cryptocurrency exchanges anytime soon are likely to end up disappointed, legal experts tell CNBC.
Crypto trading and lending firms Celsius and Voyager Digital filed for bankruptcy this month, leaving users’ assets trapped inside their platforms. Both firms froze client accounts after an influx of withdrawals led to liquidity issues.

Celsius operated much like a bank, taking customer deposits and lending them out or making risky gambles on so-called decentralized finance products to generate high yields.
Voyager had a similar model. The company got caught up in the collapse of high-profile crypto hedge fund Three Arrows Capital, which itself went belly up after defaulting on a $660 million loan from Voyager.
Such interconnectedness has left the crypto market vulnerable to contagion, with major firms falling like dominoes as a plunge in token prices has unwound excessive leverage in the system.

Is my crypto safe?

Cryptocurrencies aren’t regulated, meaning they don’t offer people the same protections they would get with money held in a bank or shares in a brokerage firm.
For example, the U.S. Securities Investor Protection Corporation insures traders up to $500,000 in cash and securities if a member broker runs into financial difficulties.

The Federal Deposit Insurance Corporation, meanwhile, offers bank depositors protection of up to $250,000 if an insured lender fails.
There are similar schemes in place in the U.K. and European Union.
With no laws governing cryptoassets, there’s no guarantee investors would be able to recoup their funds if an exchange were to freeze someone’s account — or, worse yet, completely collapse.

“There isn’t such a scheme like that at this point” for crypto, said Daniel Besikof, partner at Loeb & Loeb. 
“It wouldn’t surprise me if one happens down the line,” he added. “This will ramp up calls for enhanced regulation.”

What happens if an exchange fails?

For now, it’s still not entirely clear. While there are examples of crypto firms filing for bankruptcy overseas — Mt. Gox in Japan, for example — such an event is unprecedented in the U.S.
Creditors of Mt. Gox, which went offline in 2014, are still waiting to get repaid billions of dollars’ worth of the cryptocurrency.
The problem with centralized crypto platforms is they can mix different clients’ funds together to make risky bets, according to Daniel Saval, a lawyer with Kobre & Kim. Such commingling may lead to a ruling that the assets are the property of the exchange, not users.
“Users may be surprised to learn that, in a bankruptcy scenario, the crypto and funds held in their accounts may not be considered their own property,” Saval says.
“Exchanges will often pool different customers’ crypto and funds together in the same storage wallet or account.”

Read more about tech and crypto from CNBC Pro

What happens to customers’ funds in bankruptcy cases will depend a lot on the company’s user agreement and how it used their assets, Besikof said.
Celsius’ terms of use state that any funds deposited with the firm “may not be recoverable” in the event of bankruptcy. The firm filed for Chapter 11 protection last week, revealing a $1.2 billion hole in its balance sheet and owing users around $4.7 billion.
Celsius claims to have $167 million in cash on hand. But it’s still not letting customers withdraw their funds, and hasn’t offered clarity on when it will reopen withdrawals.
Voyager says its customers’ dollars are kept in an FDIC-insured account at Metropolitan Commercial Bank in New York — however, this claim was contested by legal experts and the bank itself. The FDIC only offers protection of funds in the event of a bank’s failure, not a crypto exchange.
For its part, Voyager says it’s working through a “reconciliation and fraud prevention process” with its banking partner, after which users will be able to regain access to their cash.
Voyager also laid out a plan to reimburse users with crypto in their accounts, Voyager shares and the company’s own token, as well as any debt recovered from Three Arrows Capital.
Both Celsius and Voyager hired Kirkland & Ellis, the prestigious law firm, to represent them in court.
“Investors holding crypto assets through Voyager Digital and now Celsius have been placed in a difficult position, with their accounts frozen, their lawsuits stayed and the value and timing of any recoveries unknown,” Besikof said.
“There is a lot of work for them to do in bankruptcy court before these issues will be resolved.”
Celsius and Voyager filed for what’s known as Chapter 11, a form of bankruptcy protection that allows firms to restructure their debts. The aim is to ensure there’s still a viable business by the end of the process.
There’s a strong likelihood that Celsius and Voyager’s users will be treated as “unsecured creditors,” legal experts said, a categorization that puts them in the same bucket as a business’ suppliers and contractors.

This means they would likely be at the back of a long queue of creditors lining up for a payout from the court proceedings — behind banks, employees and tax authorities.
In a May regulatory filing, Coinbase said its users would be treated as “general unsecured creditors” in the event of bankruptcy.
“In general, most customers in cryptocurrency exchanges are unsecured creditors, so when an exchange collapses, secured creditors are paid back first, along with legal fees,” said Dustin Palmer, managing director at consulting firm Berkeley Research Group. “Customers will be paid last on a pro rata basis. In a typical bankruptcy, this is pennies on the dollar.”
“Customers will likely have to wait until the full bankruptcy process is complete before receiving remuneration, and bankruptcy usually lasts years,” Palmer added. “Lehman took years. Some Mt. Gox customers, for example, still haven’t received any remuneration.”
Saval added customer recoveries in bankruptcy proceedings “may be further diluted by other unsecured creditors such as vendors, lessors and litigation claimants.”

How can I protect my crypto?

Investors can opt to move their crypto off an exchange into so-called “self-custody” wallets instead.
This is where someone is responsible for their own private key, a secret password required for gaining access to a crypto wallet.
Such a move comes with its own risks, however. If a crypto holder loses their private key, they may never be able to recover their funds.
There have been countless examples of people who’ve lost hard drives or USB sticks containing troves of crypto worth millions.

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SoftBank has stopped working on a London initial public offering for chip designer Arm because of political upheaval in the U.K., the Financial Times reported.
U.K. Prime Minister Boris Johnson resigned as leader of the Conservative Party earlier this month, and ministers who the FT said had important roles in discussions with SoftBank have also stepped down.
SoftBank founder Masayoshi Son previously said Arm was most likely to list on the Nasdaq in the U.S., but warned the decision was not final.

SoftBank has stopped working on a London initial public offering for chip designer Arm because of political upheaval in the British government, the Financial Times reported.
Akio Kon | Bloomberg | Getty Images

SoftBank has stopped working on a London initial public offering for chip designer Arm because of political upheaval in the British government, the Financial Times reported.
U.K. Prime Minister Boris Johnson resigned as leader of the Conservative Party earlier this month, and ministers who the FT said had important roles in discussions with SoftBank have also stepped down.

That has led to SoftBank putting talks on hold, the report said, citing people briefed on the matter.
SoftBank founder Masayoshi Son previously said Arm was most likely to list on the Nasdaq in the U.S., but warned the decision was not final.
The FT reported SoftBank was considering a dual primary listing in New York and London.

Read more about tech and crypto from CNBC Pro

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