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Another US state just launched an investigation into the firm. The US state of Vermont’s Department of Financial Regulation (DFR) has leveled serious allegations against the troubled crypto lender.
Vermont Watchdog’s Statement on Celsius
In a recent statement, the DFR said it believes Celsius is “deeply insolvent” and the firm does not have the assets and liquidity to honor its obligations to account holders and other creditors.
The DFR also argued that Celsius Network has been operating in multiple jurisdictions, including in Vermont, and claimed that the firm has been engaged in unregistered security offering to retail investors. It also pointed out that Celsius does not have a money transmitter license and might have been operating largely without regulatory oversight.
Citing these concerns, the Department announced teaming up for a multistate investigation of Celsius. It also noted that the claims made by Celsius and its CEO about the customer funds’ safety as well as the lender’s ability to meet withdrawal obligations are also false.
In mid-June, Celsius halted all withdrawals, swaps, and transfers between customer accounts. As it battled the financial crisis, the lender laid off some 150 employees shortly thereafter. It onboarded restructuring consultants from an advisory firm, Alvarez & Marsal, in a bid to “preserve and protect assets.”
“Celsius has not disclosed adequate or complete information to the public to enable investors to make informed purchases and sales of CEL. Investors who purchase CEL tokens are taking a risk that those tokens will sharply decrease in value, or even become worthless, in the future. Concerted efforts to manipulate the price of CEL may also violate state and federal laws.”
Celsius has not exactly been transparent and has taken the confidentiality route to avoid bankruptcy. As a result of its refusal to disclose its financial records, the lender lost $6 billion in liquidity assistance from potential investors.
Earlier this month, a blockchain analytics firm Arkham Intelligence report speculated that Celsius might have used client funds to execute high-risk leveraged crypto trading strategies.
Crypto Lenders in Hotbed
In addition to Celsius Network, several crypto lenders, including Voyager Digital, have come under financial turmoil.
The US California’s Department of Financial Protection and Innovation (DFPI) is now looking into multiple companies with “interest-bearing crypto-asset accounts” customer offerings that could have failed to adequately disclose risks customers face when they deposit crypto assets onto their platforms.