Bankrupt crypto lender Celsius Network has been accused of making “false and misleading claims” regarding its “financial health and compliance with securities laws,” according to a court filing by the Vermont Department of Financial Regulation.
The filing supports the United States Trustee’s motion to appoint an independent examiner following the company’s collapse. Vermont regulators allege that Celsius concealed its “massive losses” during the first half of last year from investors, despite legal requirements to disclose financial statements.
The filing references statements made by Celsius CEO Alex Mashinsky, including a claim that “all funds are safe,” which is contradicted by the assertion that “the company was insolvent and depositor funds were not safe.” Additionally, it highlights a recent meeting with creditors where the company admitted it had never generated sufficient revenue to support the yields it was paying to investors.
The document suggests a significant level of financial mismanagement, indicating that at times, returns promised to existing investors may have been funded by the contributions of new investors. Furthermore, the regulator alleges that Celsius may have manipulated the price of its CEL token to artificially inflate its balance sheet assets.
The Vermont Department of Financial Regulation expresses particular concern over the losses incurred by retail investors, stating, “The appointment of an examiner is critical to ensure the interests of these investors are protected.”