Celsius is ‘Deeply Insolvent,’ Alleges Vermont Department of Financial Regulation

The troubled lender lacks the assets and liquidity to honor its obligations to investors, DFR said.

AccessTimeIconJul 12, 2022 at 11:37 p.m. UTC
Updated May 11, 2023 at 5:36 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Celsius Network, the troubled crypto lender, “is deeply insolvent,” alleged the U.S. state of Vermont’s Department of Financial Regulation (DFR), noting the lender lacks the assets and liquidity to honor its obligations to account holders and other creditors.

“Celsius deployed customer assets in a variety of risky and illiquid investments, trading, and lending activities,” the DFR said in a statement. “Celsius compounded these risks by using customer assets as collateral for additional borrowing to pursue leveraged investment strategies,” the statement added.

Celsius is one of the crypto lenders facing financial troubles in the latest liquidity crisis in crypto. It suspended withdrawals starting June 12, cut jobs and hired restructuring experts to advise on its financial situation.

Earlier on Tuesday, the lender said that it fully paid off its debt on the decentralized finance (DeFi) protocol Aave, freeing up $26 million in tokens as part of its latest debt restructuring maneuver. It also moved $418 million in staked ether or “'stETH” to an unknown wallet.

Last week, CoinDesk reported that Celsius fully paid off and closed its loan on Maker, one of the largest DeFi lending protocols, and freed up $440 million of collateral pledged against the loan, denominated in wrapped bitcoin (wBTC) tokens. Additionally, on Tuesday, the crypto lender reduced its debt by $95 million on Aave and freed up 410,000 stETH tokens, worth $426 million at the time of publishing, also reported by CoinDesk.

The DFR believes that Celsius has been engaged in “an unregistered securities offering” by offering cryptocurrency interest accounts to retail investors. Celsius also lacks a money transmitter license, DFR alleges, noting that it means Celsius was operating largely without regulatory oversight, until recently.

Furthermore, the lender also failed to register its interest accounts as securities, leading to lack of risk disclosures to depositors and other creditors.

Due to the culmination of the concerns about Celsius, DFR has joined a multistate investigation of the lender, according to the statement.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Aoyon Ashraf

Aoyon Ashraf is managing editor with more than a decade of experience in covering equity markets


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.