Vermont Regulator Says Crypto Lender Celsius Is ‘Deeply Insolvent’

Vermont’s Department of Financial Regulation (DFR) alleged that troubled cryptocurrency lender, Celsius Network is 'deeply insolvent' and does not have enough “assets and liquidity to honor its obligations to account holders and other creditors.”

The state regulatory warning on Tuesday added that: “Celsius deployed customer assets in a variety of risky and illiquid investments, trading, and lending activities.”

In addition, it alleged that the crypto startup compounded its risks by using customer deposits as borrowing collateral for supporting its leveraged investment strategies.

“Additionally, some of the assets held by Celsius are illiquid, meaning they may be difficult to sell, and a sale may result in financial losses. The company’s assets and investments are probably inadequate to cover its outstanding obligations,” DFR added.

Additionally, the Vermont regulator pointed out Celsius is an unlicensed company and does not hold any money transmitting license. It is engaged in 'an unregistered securities offering' by offering interest-bearing cryptocurrency accounts.

The troubles at Celsius were publicly exposed when the platform suspended withdrawals on June 12. The company even hired restructuring experts to receive advice on its financial options.

“This action impacts hundreds of thousands of customers and billions of dollars of cryptocurrencies, including accounts of some Vermonters,” the state regulator said.

The crypto lending company on Tuesday said that it paid off its debt to Aave and has freed up $26 million in tokens. Moreover, it reportedly paid off the debts of Maker and has freed up $440 million worth of crypto collateral.

Meanwhile, the state regulator of Vermont cracked down upon other crypto lending platforms. It was one of the regulators to settle with BlockFi for $100 million and took action against Voyager Digital, which has now filed for bankruptcy.

“The Department has joined a multistate investigation of Celsius arising from the… concerns,” the DFR added.