- Celsius deployed customer assets in risky activities.
- Multistate investigation of Celsius in USA.
- Celsius engaged in an unregistered securities offering.
U.S. state of Vermont’s Department of Financial Regulation (DFR) claims that Celsius lacks the assets and liquidity to fulfill its obligations to account holders and other creditors.
The official Vermont DFR statement alleges that Celsius deployed customer assets in various risky and illiquid investments, trading, and lending activities. It further adds that the crypto lender compounded these risks by using customer assets as collateral for additional borrowing to pursue leveraged investment strategies.
Celsius, beaten by market volatility, suspended all operations on June 13 and is currently working towards paying off its debts. DFR claims that Celsius has engaged in an unregistered securities offering by offering cryptocurrency interest accounts to retail investors. The Department further accuses Celsius of lacking a money transmitter license. Any business that issues money orders, traveler’s checks, or other types of monetary value can be classified as a Money Transmitter.
In its official announcement raising allegations against the crypto platform, the Department claims that Celsius’s failure to register its interest accounts as securities led to its customers did not receive critical disclosures about its financial condition, risk factors, investing activities, and ability to repay its obligations to depositors and other creditors.
According to the official announcement, DFR has joined a multistate investigation of Celsius to find an answer to the concerns. The press release goes on to warn Vermont investors of communications purporting to come from Celsius, mainly if they suggest or request additional investments or payments.” The nature of cryptocurrency and the manner in which it is sold or exchanged lends itself to fraud, market manipulation and other criminal activity”, the statement reads.
As part of its last-ditch efforts to save itself from insolvency, the crypto lending platform has been actively paying off loans. Celsius has paid off MakerDAO debt and has recently also paid $20 Million in Aave debts. The company recently also hired financial advisers to prepare for possible bankruptcy.
Apart from the allegations by Vermont DFR, the crypto firm also currently faces accusations from a former employee for running a “ponzi scheme”. KeyFi has filed a lawsuit against Celsius for allegedly using customer deposits to inflate its CEL token prices and for manipulating the broader crypto market.
The DFR’s statement also accuses Celsius of using online forums to encourage investors to participate in a “short squeeze” of CEL. “These forums encourage people to purchase CEL tokens in order to drive up the price of the token, thereby hurting individuals who may hold a “short” position in CEL”, the report reads.
At the time of writing, the CEL price is $0.741725 USD with a 24-hour trading volume of $7,461,329 USD. The token is up 0.70% in the last 24 hours.