Authorities Claim Celsius Resembled Ponzi Scheme
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The agency, one of several state authorities looking into the bankrupt crypto lending company throughout its continuing bankruptcy proceedings, submitted documents in favor of the motion U.S. Trustee office to hire an independent examiner, contending that Celsius has not been open about its finances.
The Vermont investigation is possibly the most severe criticism of the company's management so far, notably because the collapse of the lender last summer contributed to the downfall of the whole global cryptocurrency market. In a recent creditor call, Celsius revealed it could not generate enough income to maintain its returns, according to the regulator, who all but accused the lender of operating at times with a Ponzi scheme-like structure.
40 Regulators Looking Into Celsius
According to the document, some 40 state officials are now investigating Celsius' activities and finances. The filing stated,
"During the course of the multistate investigation, it has become clear that Celsius, through its CEO Alex Mashinsky and otherwise, made false and misleading claims to investors about the company's financial health and its compliance with securities laws, both of which likely induced retail investors to invest in Celsius or to leave their investments in Celsius despite concerns about the volatility of the cryptocurrency market."
Manipulation Of CEL Token Value
Vermont's regulator asserts that Celsius may have gone so far as to influence the value of its CEL token and increase its ownership of the token to improve its balance sheet.
The document states that the market price of CEL was raised and supported by the crypto lender by boosting its net position in the firm and inflating the company's CEL holdings on its balance sheet and financial accounts. Liabilities would have surpassed assets since at least February 28, 2019, excluding the company's net stake in CEL.
Losses Worth $450 Million In 10-Day Period
In May 2022 alone, the document stated that Celsius lost more than $450 million in 10 days. The Vermont Department stated that an examiner should investigate whether Celsius illegally utilized assets to influence the market price of CEL, thus unfairly inflating the value of the company's net position in CEL on its balance sheet and financial statements.