Vermont financial regulator alleges Celsius and its CEO made 'false and misleading statements'

According to the regulator, Celsius "lacks sufficient assets to repay its obligations" although it suggested it had sufficient funds in its reserves to mitigate the risk of insolvency.

The Vermont Department of Financial Regulation, or DFR, alleged crypto lending platform Celsius Network and CEO Alex Mashinsky misled state regulators about the company's financial health and compliance with securities laws.

In a filing Wednesday with the U.S. Bankruptcy Court for the Southern District of New York, Vermont's financial regulator said Celsius and Mashinsky "made false and misleading statements to investors," which allegedly downplayed concerns regarding the volatility of the crypto market, encouraging retail investors to leave their funds on the platform or make new investments. According to the state regulator, Celsius and its CEO "lack sufficient assets to repay its obligations" as they claimed the company had sufficient funds in its reserves to mitigate the risk of insolvency.

The DFR cited company blog posts and Mashinsky tweets from 2021, suggesting the platform was "profitable or financially sound" at a time when it was experiencing "catastrophic losses" and "failed to generate sufficient revenue to sustain returns". Additionally, the regulator said it has become aware of credible allegations that Celsius and its management team "engaged in improper manipulation of the price of the CEL token", using investor funds to purchase additional tokens and pay many of them to depositors in the form of interest. /p>

Despite the extreme market volatility, Celsius suffered no significant losses and all funds are safe.

"By increasing its net position in CEL by hundreds of millions of dollars, Celsius increased and supported the market price of CEL, thereby artificially inflating the company's CEL holdings in its balance sheet and financial statements," said the deputy director general of the DFR c ...