Ilya Subkhankulov

Ilya Subkhankulov

BREAKING: GoCelery Has “An Imbalance of Assets” from “Malicious Abuse”

Crime, FinTech, Investing, News | May 18, 2017 By:

Cryptocurrency platform GoCelery has broken its silence on the reasons behind its suspension of withdrawals, deposits and orders.

In a note posted to its web site, the company claimed its suspension was the result of “malicious abuse by certain Celery users,” and said an “imbalance of assets in the Celery system was created. Law enforcement was involved where appropriate. Market forces created additional strain on the system. No security incident was suffered by the Celery system.”

The post went on to say that “Funds will be distributed on a schedule that is being determined. Celery still has a profitable underlying business and is looking forward to making all customers whole. Further details will be provided.”

Company principal Ilya Subkhankulov declined to comment further. “I cannot elaborate because litigation may be an option in the future.”  He also declined to estimate when normal operations would resume. “There is no ETA yet.”

Asset imbalance is a term used by corporations that occurs when the value of a company’s net assets amounts to less than half of the company’s share capital. Shareholders lose the real value of the shares held. It is unclear what type of corporate structure GoCelery maintains.

If GoCelery is a corporation, typically the company director has two months to call a shareholder meeting from the occurence of the asset imbalance.

At that meeting, remedy options include increasing the share capital to restore the asset balance, sometimes done by issuing new shares; reducing the share capital to restore the asset balance, either by reducing the value of each each share, their redemption, or their grouping in order to be exchanged; or carrying out an “accordion operation,” where there is a reduction of share capital to zero, followed by an increase in the share capital to reach at least the minimum required by law.

Another option is to dissolve the company or obtain a third-party financing. That loan would be in a subordinated position in relation to the other debts and obligations of the company.

SOCIAL MEDIA SOUNDED ALARM

Word first surfaced of the problems at GoCelery on social media. The company statement was posted on its update web page and via Twitter, and its silence caused additional panic among investors wary of unstated problems at the firm.

Bitcoin and other cryptocurrencies have risen dramatically in price over the last month, with bitcoin going over the $1,800 USD mark, an all-time high.

GoCelery is a subsidiary of trading platform provider BTX Trader and has been around since 2014. Ilya Subkhankulov and Divya Thakur are the operators.

GoCelery is not the first exchange to suspend operations. Many Chinese exchanges suspended withdrawals in the wake of regulator scrutiny this January, and popular exchange Bitfinex has also halted its fiat withdrawals. Neither has returned to full operations in the interim.