Financial watchdogs in Vermont have essentially declared that the bankrupt Celsius Network LLC resembled a Ponzi scheme at times. They claim that the cryptocurrency lender used funds from new investors to repay those from previous investors, misled investors about the strength of its finances, and inflated its balance sheets using the CEL token.
Due to alleged concerns over Celsius’ financial transparency during ongoing bankruptcy proceedings, the Vermont Department of Financial Regulation made these claims in a filing on Wednesday in support of the U.S. Trustee’s Office motion to appoint an independent examiner.
“This shows a high level of financial mismanagement and also suggests that, at least at some points in time, yields to existing investors were probably being paid with the assets of new investors,” the filing said.
The petition claims that Celsius was unable to pay investors back as far as July 2021, when the business sustained large losses that it then attempted to conceal.
In order to improve its balance sheets, the corporation is also accused by regulators of increasing its holdings and manipulating the price of its CEL token.
After months of uncertainty due to the crypto industry’s fallout from the multi-billion dollar failure of algorithmic stablecoin project Terra/Luna, Celsius filed for Chapter 11 bankruptcy in the Southern District of New York in the middle of July.
This comes after Celsius co-founder Daniel Leon declared his whole stock stake in the company to be “worthless” in a document submitted to the US Bankruptcy Court on Monday.