Crypto Lender Celsius Is 'Deeply Insolvent': US State Regulator

Celsius is said to have deployed customer assets in different “risky and illiquid investments, trading, and lending activities.”

Celsius promised exorbitantly high interest rates of up to 17 percent to customers.

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Celsius, the US-headquartered cryptocurrency lending platform, which had blocked all withdrawals last month due to “extreme market conditions,” is said to be “deeply insolvent” by the Department of Financial Regulation (DFR) of the US state of Vermont. The DFR said that Celsius doesn’t have enough assets and liquidity to be able to honour its obligations to creditors and customers. Earlier this month, the troubled crypto platform announced that it had laid off 150 employees, which is a quarter of its workforce. 

Celsius promised exorbitantly high interest rates of up to 17 percent to customers on their crypto deposits, the DFR said in a consumer alert on Tuesday. The platform’s decision to pause all withdrawals was said to have impacted “hundreds of thousands of customers and billions of dollars of cryptocurrencies, including accounts of some Vermonters.”

ALSO SEE: Celsius Crypto Lending Platform Lays Off 150 Employees: Find Out Why

“The Department believes Celsius is deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors,” the DFR said adding that Celsius deployed customer assets in different “risky and illiquid investments, trading, and lending activities.”

ALSO SEE: Celsius Blocks Withdrawals Due To 'Extreme Market Conditions'

“Celsius compounded these risks by using customer assets as collateral for additional borrowing to pursue leveraged investment strategies,” the DFR said. The Vermont regulator said that some of the assets held by Celsius “are illiquid,” which means they could be difficult to sell, “and a sale may result in financial losses.”

ALSO SEE: Celsius Sued By Former Employee, Accused Of Being A Ponzi Scheme

Earlier this month, Celsius was sued by a former employee who accused the platform to use customer funds to manipulate the price of its eponymous proprietary token. The former money manager noted in his complaint that Celsius lost hundreds of millions of dollars by failing to hedge risk.

ALSO SEE: Crypto Lender Celsius Hires Restructuring Lawyers

As per the complaint filed at a New York state court by KeyFi, Celsius was said to be struggling to cover the payouts and suffered “severe exchange rate losses.” KeyFi was founded by Jason Stone, a former Celsius money manager. In the complaint, Stone compared Celsius to a Ponzi scheme, alleging that the company had duped him out of potentially hundreds of millions of dollars in pay.

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