- The Department of Financial Regulation (DFR) of the state of Vermont in the United States issued a press release stating that Celsius Network “is deeply insolvent”.
- The regulator issued an indictment against Celsius, alleging that the company had mismanaged its clients’ funds by allocating them to risky and liquid investments.
- Since mid-June, Celsius has shown severe liquidity problems as it began suspending withdrawals, laying off employees and even hiring expert restructuring lawyers.
July 12 the Department of Financial Regulation (DFR) of the state of Vermont in the United States issued a press release stating that Celsius Network “is profoundly insolvent”.
For those who do not know, Celsius is a crypto firm that offers lending services to its clients and during the bull market, it managed to be crowned one of the most important lenders in the industry.
However, the company’s situation began to change as the bear market deepened and, especially, after the collapse of the Terra ecosystem.
That is how, since mid-June the firm began to demonstrate symptoms of a disease that was growing. Basically proved to have severe liquidity problems as it began suspending withdrawals, laying off employees, and even hire lawyers restructuring experts.
There are no assets available to meet its obligations
The Vermont DFR press release began by issuing a warning against Celsius by reminding users in the state that the company does not have the necessary licenses to operate in that territory.
Having clarified this, the DFR alleged that Celsius was in a state of insolvency.. This means that the debtor cannot meet its obligations due to lack of liquid means.
Likewisethe regulator issued an indictment against Celsius alleging that the company had mismanaged its clients’ funds by allocating them to risky and liquid investments.
“AIn addition to the ordinary risks of investing in cryptocurrencies, Celsius interest account holders were also exposed to the credit risk that Celsius would not be able to return their tokens upon withdrawal.“.
And of course, in theory, Celsius users had no idea they were being exposed to such levels of risk.
“Celsius compounded these risks by using client assets as collateral for additional loans to pursue leveraged investment strategies.”added the statement.
As if it wasn’t bad enough the Vermont regulator believes Celsius’s chances of paying its customer debt obligations are low.
In fact, the statement ensures that “Past representations made by the Company, its CEO and other Celsius representatives about the safety of client funds and the Company’s ability to meet withdrawal obligations are untrue.”.
That is how Vermont’s state financial regulator has joined the multistate investigation into Celsius. Yes, multistate. There are already six states in the United States, counting Vermont, to open an investigation into Celsius.
Celsius’s problems keep coming
As previously reported by Bitcoin Mexico, on July 7, KeyFi Inc filed a complaint alleging that Celsius had committed fraud by operating in the style of a ponzi scheme.
Specifically, KeyFi exposes how Celsius was using the funds of its clients to “manipulate the cryptocurrency markets” without control and exposing itself to high risks.
Therefore, when entering a bearish phase of the crypto market, Celsius began to face liquidity problems and, according to KeyFi, in order to meet the withdrawal requirements, the company used the funds of the users who were depositing, and to generate incentives for users to make deposits, Celsius established attractive interest rates.
“Thus, while Celsius continued to trade as a transparent and well capitalized business, it had in fact become a Ponzi scheme.”states the lawsuit.
This is how the accusations against Celsius do not stop coming and there is still a lot to investigate before obtaining a verdict. Still, it should be taken as a reminder to all crypto users about the risks they expose themselves to.
You might be interested in: