According to the Vermont Department of Financial Regulation, crypto lending platform Celsius “is severely bankrupt,” stating that the firm lacks the assets and liquidity to pay its debts to account holders and other creditors.
The DFR stated, “Celsius deployed customer assets in various risky and illiquid investments, trading, and lending activities.”
The most recent liquidity crisis in crypto has prompted Celsius to enter bankruptcy. It halted withdrawals on June 12 and reduced staff to deal with its financial situation, which it later advised restructuring experts.
Celsius Claimed They Already Paid the Debts
On Tuesday, the lender announced that it had entirely paid off its debt on the DeFi protocol Aave, releasing $26 million in tokens as part of its latest debt restructuring action. It also moved $418 million in staked ether to an unknown wallet.
The regulatory document said that the company was now free of debt and would have no financial obligations in the immediate future. Last week, according to reports, Celsius had fully paid off and redeemed its loan on Defi loan protocol Maker, freeing up $440 million in collateral pledged against the loan. On Tuesday, reports also said that the crypto lender reduced its debts “by $95 million on Aave and freed up 410,000 stETH tokens, worth $426 million” as of this writing.
The DFR alleges that Celsius has engaged in an “unregistered securities offering” of cryptocurrency interest accounts to individual investors.
The DFR also claims that Celsius lacks a money transmitter license, which it interprets as implying that Celsius was operating largely without regulation until all the bad news surrounding it. Additionally, the lender did not register its interest accounts as securities, resulting in insufficient risk disclosures for depositors and other creditors. Because of the consecutive issues with Celsius, DFR collaborated with other investigators to look into the lender’s other potential hidden matters.