Business model

Crypto lender Celsius cheated investors over financial issues, regulator says

Circumstances surrounding the failure of crypto lender Celsius continue to take unexpected turns, with the company declaring bankruptcy, charges have been brought against a former director over responsibility for the multi-million dollar loss and the latest news to emerge from the company reportedly hid its financial problems from its investors.

Indeed, it’s possible that Celsius concealed its money troubles from its investors and “engaged in inappropriate price manipulation” of the platform’s tokens to improve the company’s balance sheet and finances, according to a report. public record submitted to court on Wednesday, September 7. .

The Vermont Department of Financial Regulation filed the case in support of the United States Trustee’s motion to appoint an independent reviewer. The trustee overseeing Celsius’s bankruptcy case has said in the past that he was looking for an examiner to help obtain new information and alleviate “confusion and anxiety”.

According to the most recent filing, Celsius suffered “massive losses” in the first seven months of 2021 and “two significant adverse events” in June and July of that year, based on a preliminary review of the filings. financial. Additionally, despite state and federal securities laws requiring the company to disclose its financial statements, the company hid its losses from investors.

Additionally, the filing claimed that Celsius manipulated the price of its CEL token. The transaction may have “artificially” increased the company’s CEL holdings on its balance sheet.

According to the filing, the company “never earned enough revenue to sustain the returns paid out to investors.”

What was the deposit?

According to the latest filing regarding the bankrupt lender:

“During the multi-state investigation, it became clear that Celsius, through its CEO Alex Mashinsky and others, made false and misleading statements to investors regarding, among other things, the financial health of company and its compliance with securities laws,” the filing said. said.

He continued:

“Which likely prompted retail investors to either invest in Celsius or leave their investments in Celsius despite concerns about cryptocurrency market volatility.”

Celsius’ business model called into question

Celsius’ business model, as well as its operations, investments and lending activities, would all be subject to review by an independent reviewer. According to the statement, a reviewer will also examine Celsius’s management to determine the company’s “role in creating the current illiquidity of debtors”, as well as any “irregularities”.

On July 13, Celsius filed for bankruptcy. Since then, more than three hundred customers have sent letters, some claiming to have been misled and asking for their money back.

On September 6, a lawyer representing Celsius said the company had been offered various additional funds to help finance its restructuring process. The company said it would hold a meeting with a committee representing unsecured creditors next week and is working “expeditiously” on a way forward.

Finally, the trustee said in the filing that a reviewer could clear up any misunderstandings about the matter that may have arisen from places such as social media.