Celsius crypto lender misled investors over financial troubles, says regulator

The circumstances surrounding the failure of the crypto lender Celsius continue to take unexpected turns, with the company declaring bankruptcy, accusations being leveled against a former manager for the responsibility for the loss of a number of millions of dollars, and the latest news to emerge of the firm reportedly hiding its financial troubles from its investors.

Indeed, it is possible that Celsius disguised its money troubles from its investors and “engaged in the improper manipulation of the price” of the platform’s tokens in order to improve the firm’s balance sheet and financials, according to a public court filing submitted on Wednesday, September 7.

The filing was submitted by the Vermont Department of Financial Regulation in order to lend support to the motion made by the United States Trustee to appoint an independent examiner. The trustee who is supervising Celsius’s bankruptcy case said in the past that they are looking for an examiner to assist in obtaining new information and alleviating “confusion and anxiety.”

According to the most recent filing, Celsius sustained “massive losses” in the first seven months of 2021 and “two material adverse events” in June and July of that year, based on a preliminary study of financial records. Furthermore, despite state and federal securities laws requiring the corporation to disclose its financial statements, the company kept its losses hidden from investors.

Furthermore, the filing claimed that Celsius manipulated the price of its CEL token. The transaction may have “artificially” increased the company’s CEL holdings on its balance sheet.

According to the filing, the company “never earned enough revenue to support the yields being paid to investors.”

What the filing entailed

As per the latest filing concerning the bankrupt lender:

“During the course of the multistate investigation, it has become clear that Celsius, through its CEO Alex Mashinsky and otherwise, made false and misleading claims to investors about, inter alia, the company’s financial health and its compliance with securities laws,” the filing said.

It continued:

“Both of which likely induced retail investors to invest in Celsius or to leave their investments in Celsius despite concerns about the volatility of the cryptocurrency market.”

Celsius business model called into question

Just last month, the business model of Celsius, as well as its operations, investments, and loan activities would all be subject to examination by an independent examiner. According to the statement, an examiner will also look into the management of Celsius to determine the company’s “role in creating the Debtors’ current illiquidity,” as well as any “irregularities.” 

On July 13, Celsius filed for bankruptcy. Since then, more than three hundred clients have sent letters, with some of them asserting that they were misled and requesting the recovery of their money. 

On September 6, a lawyer representing Celsius said that the company had been presented with various offers of additional funds to assist in funding its restructuring process. The company has announced that it will have a meeting with a committee representing unsecured creditors the next week and that it is working “expeditiously” on the way ahead.

Finally, the trustee said in the filing that an examiner could clear up any misunderstandings regarding the matter that may have arisen from places such as social media.