Cryptocurrency giant Celsius filed for bankruptcy last July, with dire consequences for the broader ecosystem. But his fall would not have been brutal, according to the regulator responsible for examining the case. The platform would indeed have been insolvent since 2019. How is this possible?
Celsius insolvent for many years?
The Vermont Department of Financial Regulation is responsible to review the financial condition of Celsius, since the company declared bankruptcy. In a document filed Wednesday, the institution says that the latter, as well as its CEO Alex Mashinsky, allegedly made false statements about the financial health of the company.
👉 Lost in the Celsius case? Discover our file to understand how the platform collapsed
Specifically, the regulator cited tweets and blog posts where Mashinsky allegedly offered reassurance about the company’s financial health, as it would have been knowingcatastrophic losses».
All funds are safe. We continue to be open for business as usual
As part of our responsibility to serve our community, @CelsiusNetwork implemented and abides by robust risk management frameworks to ensure the safety and security of assets on our platform.
—Alex Mashinsky (@Mashinsky) May 11, 2022
According to the document, the platform would have repeatedly reassured its users, in a misleading way:
“Celsius did not have sufficient assets to repay its obligations at the time such declarations were made.»
Moreover, on August 19, during a meeting with its creditors, Celsius would have admitted that “the company would never have had enough income to support rewards paid to investors“.
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The price of CEL tokens manipulated?
Another criticism made of Mashinsky and Celsius as a whole: the price of the CEL token would have been manipulated. The regulator accuses the company of using investor funds to buy CEL tokens and pay custodians interest. The maneuver would have allowed of “artificially increase the company’s CEL reserves on its balance sheet and financial statements“.
Celsius’ insolvency dates back to 2019, according to the regulator responsible for examining the case:
“The debts of the company would have exceeded its assets since at least February 28, 2019.»
The report points out that Celsius’ bankruptcy was triggered by the fall in prices in 2022, but that it was the company’s long-term financial strategy that was unsustainable. Hence an accusation from the Financial Regulation Department:
“[Il faudra déterminer] whether the company’s actions and practices have allowed improperly enrich insiders and other CEL token holdersto the detriment of retail investors with Earn accounts.»
These are therefore very heavy accusations that weigh on Celsius, and which put its bankruptcy into context. It should anyway set a precedent for the DeFi sectorand we imagine that future regulations will be partially based on this case.
👉 Related – Celsius may soon allow withdrawals for some users
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Source: Vermont Department of Financial Regulation
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