As Celsius got closer to solving its liquidity problems, the company faced new allegations. The new allegations come from the Vermont Department of Financial Regulation (DFR).
According to an pronunciation released by the Vermont DFR,
“Celsius is deeply insolvent and lacks the assets and liquidity to meet its obligations to account holders and other creditors. †
The department accuses the company of deploying client assets in risky investments that lack liquidity.
According to the statement,
“Celsius exacerbated these risks by using client assets as collateral for additional loans to pursue leveraged investment strategies.”
In addition, the department said some of the company’s assets are illiquid, making the assets difficult to sell, or the sale could lead to losses.
The department emphasizes that Celsius is not licensed in Vermont and believes that Celsius was involved in an unregistered securities offering. The statement also says that the company does not have a money transmitter license and therefore operated without much oversight.
Also, the company did not register its interest accounts as securities. Thus, customers were unaware of the company’s operations, financial condition, risks and ability to repay creditors.
Due to the above causes, the Vermont DFR has a multi-state research from Celsius.
The department says
“Previous statements by the company, the CEO and other Celsius representatives regarding the safety of customer funds and the company’s ability to meet withdrawal obligations are untrue. †
Was Celsius involved in a “short squeeze”?
The DFR statement mentions online forums asking investors to participate in a CEL short squeeze. CEL is Celsius’s proprietary token.
According to the DFR,
“These forums encourage people to buy CEL tokens in order to drive up the price of the token, harming individuals who may have a “short” position in CEL.”
The department accuses the company of not disclosing enough information to the public for investors to make the right decisions. The department has warned investors that the CEL token could fall in value or become worthless. Adding that,
“Joint efforts to manipulate the price of CEL may also violate state and federal laws.”
Celsius’s troubles don’t seem to end. In addition, the new allegations come right after the company recovered $410 million of its staked Ether (stETH). The company was a large sETH holder and was blamed for sETH losing its 1:1 pairing to Ether. In addition, Celsius paid more than $81 million in debt to AAVE. However, the company still owes approximately $59 million to Aave and Compound Financing†