The Warning from Vermont’s Department of Financial Regulation
On Tuesday, Vermont’s Department of Financial Regulation (DFR) raised a red flag regarding Celsius Network, a troubled crypto lending firm. The DFR made it clear that Celsius is not licensed to offer its services in the Green Mountain State. They labeled Celsius as “deeply insolvent,” indicating that the company does not possess adequate assets or liquidity to meet its obligations to customers.
The Grave Allegations Against Celsius
The DFR’s accusations against Celsius are not something to be brushed off lightly. According to the regulator, Celsius mismanaged customer funds, directing them toward risky and illiquid investments instead of sticking them in something sensible, like a low-yielding piggy bank. It was pointed out that in addition to the regular risks associated with cryptocurrency investing, customers holding Celsius interest accounts were also subjected to significant credit risk—the risk that Celsius simply wouldn’t be able to return their tokens upon withdrawal.
Unregistered Securities and Not-So-Licensed Lending
The DFR asserted that the high-interest accounts offered by Celsius qualify as unregistered securities. Cue the dramatic music! On top of that, Celsius was also operating without a money transmitter license necessary for providing investment services in Vermont. This has undoubtedly raised eyebrows amongst regulators.
The Multistate Investigation: Band Together!
The DFR isn’t alone in this crusade against Celsius. With Vermont’s admission into the multistate investigation, they join the ranks of other states, including Alabama, Kentucky, New Jersey, Texas, and Washington. All of these states are scrutinizing Celsius for their questionable activities after the lender paused all withdrawals, swaps, and transfers on June 13—just one day after their CEO confidently stated that “all is well.” Talk about a plot twist!
The Bull Market Glory Days
At one point, Celsius was basking in the glory of the crypto bull market, managing billions of dollars in customer funds and doling out impressive interest rates to account holders. However, amidst the glitter, red flags started popping up as analysts and regulators cautioned that such high lending products often came with risks that were downplayed by crypto firms. Silicon Valley’s version of a ‘get-rich-quick’ scheme, if you will.
Celsius Under Pressure: The Aftermath and Restructuring Plans
Following a harsh bear market initiated by the catastrophic Terra ecosystem crash, signs of strain on Celsius’s operations became evident. Reports emerged indicating that market conditions weren’t entirely responsible for Celsius’s challenges; instead, a hefty dose of mismanagement and questionable business practices led to their current plight.
The Future: A Rocky Road Ahead
As Celsius scrambles to navigate through turbulent waters, they are reportedly recruiting new legal teams and formulating restructuring plans to dodge the dreaded bankruptcy. They have also been working to settle numerous DeFi loans, including a recent payment of $20 million in USD Coin (USDC) to Aave and the clearance of a $41.2 million debt to the Maker protocol. This maneuver has freed up over $500 million in Wrapped Bitcoin (wBTC) collateral. So, while Celsius may be down, they’re clearly not out of ideas—yet!
