The Vermont Department of Financial Regulation (DFR) claims that crypto lender Celsius Network is ‘deeply insolvent’ and encourages the network’s investors to “proceed with caution.”
As per the statement from the regulator, “Celsius lacks the assets and liquidity to honor its obligations to account holders and other creditors.”
The Vermont DFR states that assets from customers were used by Celsius in a range of dangerous and unstable lending, trading, and investing activities.
By using customer assets as collateral for new loans to pursue leveraged investing methods, Celsius increased these risks, the department says.
Furthermore, some of the assets held by Celsius are not liquid, which makes it possible that selling them would be costly. The company’s investments and assets are probably not enough to pay off its debts.
Currently, Celsius has fully repaid its debts to multiple DeFi platforms including Aave and Maker protocol as rumors were spreading that the network is gearing up to file for bankruptcy.
Celsius has met with insolvency lawyers and is indeed considering declaring bankruptcy, notes the regulator.
A bankruptcy filing may influence user investment rights and the value of their interest account balances. Vermont DFR urges the Celsius users to check with their own legal counsel regarding their position and how the bankruptcy would affect their assets.
Celsius’ users did not receive any important information about its financial situation, as a result of its inability to register its interest accounts as securities.
The Vermont Department of Financial Regulation has now joined a multistate investigation into Celsius for its failure to disclose investing activities, risk factors, and ability to repay its obligations to depositors and other creditors.
Previous claims about the security of customers’ funds and the company’s capacity to fulfill withdrawal commitments made by the Company, its CEO, and other Celsius representatives are inaccurate, Vermont FDR adds.
Vermont investors are advised to be cautious of correspondence claiming to be from Celsius, particularly if they recommend or seek additional investments or payments.
Investors in Vermont are also asked to be suspicious of any proposals that they put their accounts in “HODL mode,” increase their CEL token holdings, or take any other actions that entail paying more money.
Also Read: How Celsius crashed Crypto Market?
Vermont DFR concluded the statement by noting “The Department will update this Alert in the event of a bankruptcy filing by Celsius or other significant developments.”
