The Vermont Department of Financial Regulation, or DFR, has accused crypto lending platform Celsius Network and CEO Alex Mashinsky of misleading state regulators about the firm’s compliance with financial health and safety laws.
In a filing Wednesday in the U.S. Bankruptcy Court for the Southern District of New York, Vermont’s financial regulator Celsius & Mashinsky “made false and misleading claims to investors” that downplayed concerns about volatility in the crypto market, prompting retail investors to flee their homes. Making money or new investments on the platform. According to the state regulator, Celsius and its CEO said the company had enough cash in its reserves to mitigate the risk of bankruptcy, but “did not have sufficient assets to meet its obligations.”
DFR published the company’s blog posts and tweets from Mashinsky in 2016. The regulator also said it had learned of claims that Celsius and its management team were “manipulating the value of CLL tokens” by using investors’ money to buy more tokens and paying many of them as interest to depositors.
Despite the high market volatility, Celsius has not suffered any major losses and all funds are safe.
— Alex Mashinsky (@Mashinsky) May 11, 2022
“By increasing its net position in CEL by hundreds of millions of dollars, Celicius inflated CEL’s market value, thereby artificially increasing the company’s CEL holdings on its balance sheet,” said DFR Assistant General Counsel Ethan McLaughlin. “Except for the company’s net position in CL, liabilities would have exceeded assets at least as of February 28, 2019. These practices may have enriched seniors in Celsius at the expense of retail investors.”
The financial regulator has called for an investigation into Celsius’ manipulation of the value of CEL tokens.[ed] The value of the company’s net position in CLL on the balance sheet and balance sheet. Although Celsius officially filed for Chapter 11 bankruptcy in July, a balance sheet analysis conducted by DFR suggested the platform could file for bankruptcy on May 13, if not earlier.
Related: Celsius loss processes show complexities at a time when the prospect of recovery is declining
Cointelegraph in 2016 Celsius reported on August 16 that it could run out of cash by October, with the company’s debt nearly $2.8 billion, leaving a $1.2 billion shortfall in bankruptcy claims. In bankruptcy court proceedings, Celsius founder Daniel Lyons said his stake in the platform, 32,600 common shares, was effectively “worthless.” On September 1, former Celsius users filed a petition in bankruptcy court seeking legal remedies to recover $22.5 million owed on the platform.
Cointelegraph reached out to Celsius and Alex Mashinsky, but did not receive a response at the time of publication.