Crypto lending platform Celsius Network is “highly insolvent” – it lacks liquidity tofulfillment of obligations. This was stated by the Vermont Department of Financial Regulation (DFR).
“Celsius used customer funds tovarious risky and illiquid investments, trading and lending. […] In addition, some of the assets owned by Celsius are illiquid […],” the post reads.
According to DFR, user funds acted inas collateral for additional loans “to implement investment strategies”. According to the regulator, the company's assets are not enough to cover outstanding liabilities.
The agency added that the platform operates in many jurisdictions, including Vermont.
"The Department believes that Celsius was involved inunregistered placement of securities […]. This means that, until recently, Celsius operated largely without regulatory oversight,” officials said.
According to them, platform customers have not receivedimportant information about its financial condition, risk factors and ability to repay its obligations. The DFR stated that they have joined the investigation related to the above issues.
The Department emphasized that the statements of the company and top management about the safety of user funds and the ability to fulfill obligations to withdraw funds "do not correspond to reality."
On June 13, Celsius suspended withdrawals, exchanges, and transfers between accounts.
Lawyer Adam Levitin called the company's bankruptcy almost inevitable. In his opinion, the management of the platform decided to bet on the "adventure with the resurrection."
On July 7, Celsius repaid the loan in full inDeFi protocol MakerDAO and withdrew a total of 23,962 WBTC of collateral in the amount of ~$490 million. Just a few hours after that, the site transferred 24,463 WBTC to the address of the FTX crypto exchange.
Recall that Arkham analysts estimated Celsius’ losses on investments in DeFi and NFT at $390 million.
Read more about what happened to Celsius and how the incident affected the market in the ForkLog cards.
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