The Vermont state regulator has submitted a filing to the bankruptcy court, showing support for an independent examiner. The filing says that Celsius had not been transparent regarding its financial state.
The Vermont Department of Financial Regulation has made a filing to the United States Bankruptcy Court in the Southern District of New York, offering details on Celsius Network’s insolvency. The filing shows that the department agrees with the issues made by the United States Trustee’s Office. The latter said that the Celsius bankrupt case requires an independent examiner, and filed a motion regarding the same in August 2022.
In a nutshell, the Vermont regulator said that Celsius had not been transparent regarding its financials, and the filing uses blunt language to describe the situation. It says that the company made false and misleading claims and that it was unable to repay investors going back as far as July 2021.
Several state regulators are investigating Celsius’ finances, and the filing notes that the concerns include “potential unregistered securities activity, mismanagement, securities fraud, and market manipulation by Celsius and its principals.” The filing reads,
“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, both of which likely induced retail investors to invest in Celsius or to leave their investments in Celsius…”
Celsius may be facing much more trouble
The investigation offers portentous omens for Celsius, which could face similar filings from other state regulators. Further investigations may also show the same support for an independent examiner, and that would not be positive for the company.
Another report said that Celsius CEO Alex Mashinsky took over the company’s trading strategy and that he personally directed individual trades and overruled expert suggestions. The lender has been accused of running a Ponzi scheme, and it has committed to paying back only 22% of customer funds.
CEO Mashinsky also under the microscope
The actions of the company’s CEO are also being investigated. The Vermont state regulator’s filing said that the lender “lacked sufficient assets to repay its obligations,” despite saying that it had enough funds.
The filing pointed to statements made by Mashinsky and company blog posts, which claimed that Celsius was in a healthy financial position and that all funds are safe. The CEO said in May 2022 that the company had “not experienced any significant losses and all funds are safe.”