Celsius “lacked sufficient assets to meet its debts,” although saying it had enough reserves to avoid insolvency
The Vermont Department of Financial Regulation (DFR) said Celsius Network and its CEO Alex Mashinsky misled state authorities regarding the company’s financial health and compliance with securities laws.
Vermont’s financial regulator claimed in a document filed on Wednesday with the U.S. Bankruptcy Court in the Southern District of New York that Celsius and Mashinsky “made false and misleading claims to investors” that allegedly downplayed worries about market volatility.
Despite claiming to have enough money in reserves to lessen the risk of insolvency, Celsius and its CEO “lacked sufficient assets to repay its commitments,” according to the state regulator.
Mashinsky’s tweets and corporate blogs from the beginning of 2021 were referenced by the DFR as evidence that the platform was “profitable or financially healthy” despite suffering “catastrophic losses” and failing to generate enough income to support returns.
The regulator also stated that it had learned of allegations that were based on solid evidence that Celsius and its management team “engaged in the inappropriate manipulation of the price of the CEL token,” utilizing investor cash to buy extra tokens and giving many of them to depositors as interest.
Ethan McLaughlin, associate general counsel for DFR, stated that Celsius artificially inflated the company’s CEL holdings on its balance sheet and financial statements by boosting its Net Position in CEL by hundreds of millions of dollars.
Liabilities would have outweighed assets since at least February 28, 2019, absent the Company’s Net Position in CEL.
At the expense of retail investors, these methods might also have benefited Celsius insiders.
A probe into Celsius’ suspected price-fixing of CEL tokens is demanded by the financial watchdog since it “artificially inflated[ed] the worth of the company’s net position in CEL on its balance sheet and financial statements.”
Despite the fact that Celsius formally filed for Chapter 11 bankruptcy in July, the DFR’s review of the platform’s balance sheet indicated that it might have been insolvent as early as May 13.
