Vermont’s Department of Financial Regulation (DFR) said Celsius is “deeply insolvent” and accused it of mismanaging its customers’ funds.
Celsius is deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors.
According to the statement, the financial regulator believes Celsius engaged in “offering unregistered securities” and lacked a “money transmitter license.” This means the firm had operated in the state without any regulatory oversight.
The financial regulator revealed that it had joined a multistate investigation of Celsius.
Other US states are investigating Voyager and Celsius
Bloomberg reported that regulators in Texas and Alabama are investigating the operations of Celsius and Voyager Digital.
According to Bloomberg, the state authorities are looking into the two firms’ operations to see if they met disclosure requirements and whether their product offerings qualify as securities.
Joe Rotunda, the director of enforcement at the Texas State Securities Board, said:
“What we’re seeing now is that a lot of these crypto-lending firms may not have fully disclosed what they were doing on the backside with investors’ money.”
The chief deputy director at the Alabama Securities Commission, Amanda Senn, also backed this up, saying:
“We are investigating these companies and trying to figure out what happened and why. We are making inquiries. It’s still the initial stages, but we have a responsibility on behalf of our investors in our states.”
Celsius showed the first signs of trouble after it laid off some staff and froze customers’ withdrawals. Since then, other crypto firms like Voyager, CoinFlex, and others have frozen withdrawals.
Meanwhile, Voyager has filed for Chapter 11 bankruptcy. It revealed that it has almost $1.3 billion in outstanding debts owed by Alameda Research and Three Arrows Capital.
Celsius is repaying its debts
Celsius has paid some of its debts to DeFi protocols. It recently paid off its debts to Aave and got back $410 million in staked Ethereum collateral. It still owes Aave about $8.5 million.
This is similar to the move it made last week when it paid off all its $228 million debts to Maker Protocol and freed up $440 million worth of wrapped Bitcoin (wBTC) pledged as collateral.
But it still owes Compound about $50 million in USDC and has $227 million worth of collateral locked in Aave and Compound.