Vermont Department of Financial Regulation claims Celsius is very insolvent

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Vermont Department of Financial Regulation claims Celsius is “very insolvent”

Vermont Department of Financial Regulation claims Celsius is very insolvent
Alex Mashinsky, Founder and CEO of Celsius Network (CoinDesk)
Source: CoinDesk
1657710100 13 Jul / 11:01

The Department of Financial Regulation (DFR) of the U.S. state of Vermont asserted that Celsius Network is "seriously insolvent," as the lender lacks the assets and liquidity to honor its commitments to account holders and other creditors.

The DFR stated that Celsius utilized client money in various hazardous and illiquid investments, trading, and lending operations. "Celsius exacerbated these risks by utilizing client assets as collateral for more borrowing to pursue leveraged investing strategies," the statement continued.

Celsius is one of the crypto lenders experiencing financial difficulties during the most recent crypto liquidity crisis. Beginning on June 12, it halted withdrawals and sought restructuring professionals to advise on its financial predicament.

As part of its latest debt restructuring strategy, the lender said on Tuesday morning that it has fully repaid its debt on the decentralized financing (DeFi) platform Aave, freeing over $26 million in tokens. Additionally, $418 million in staked ether or “‘stETH” was transferred to an unknown wallet.

Last week, CoinDesk reported that Celsius paid off and ended its loan on Maker, one of the significant DeFi lending systems, and released $440 million in wrapped bitcoin (WBTC) tokens offered as security against the loan. In addition, on Tuesday, the cryptocurrency lender lowered its debt on Aave by $95 million and released 410,000 stETH tokens, valued at $426 million at the time of publication, as reported by CoinDesk.

The DFR thinks Celsius has engaged in an “unregistered securities offering” by providing retail investors with bitcoin interest accounts.

DFR further contends that Celsius lacks a money transmitter license, stating that until recently, Celsius operated mainly without regulatory scrutiny.

In addition, the lender neglected to register its interest accounts as securities, depriving depositors and other creditors of risk warnings.

According to the announcement, DFR has entered a multistate investigation into Celsius due to the accumulation of concerns regarding the lender.

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