The CEO of cryptocurrency lending platform Celsius Network and state authorities were allegedly deceived regarding the company’s financial standing and compliance with securities rules, according to the Vermont Department of Financial Regulation, or DFR, Cointelegraph noted.
Vermont’s financial regulator claimed in a document filed on Wednesday with the U.S. Bankruptcy Court in the Southern District of New York that Celsius and Mashinsky “made false and misleading claims to investors” that allegedly downplayed worries about market volatility and enticed small-scale investors to keep their money on the platform or make new investments, Cointelegraph stated.
Despite claiming to have enough money in reserves to lessen the risk of insolvency, Celsius and its CEO “lacked sufficient assets to repay its commitments,” according to the state regulator.
Mashinsky’s tweets and corporate blogs from the beginning of 2021 were referenced by the DFR as evidence that the platform was “profitable or financially healthy” despite suffering “catastrophic losses” and failing to generate enough income to support returns. The regulator also stated that it had learned of allegations that were based on solid evidence that Celsius and its management team “engaged in the inappropriate manipulation of the price of the CEL token,” utilising investor cash to buy extra tokens and giving many of them to depositors as interest.
Celsius boosted and supported the price of CEL by boosting its Net Position by hundreds of millions of dollars, falsely inflating the company’s CEL holdings on its balance sheet and financial accounts, according to DFR associate general counsel Ethan McLaughlin. Liabilities would have outweighed assets since at least February 28, 2019, absent the Company’s Net Position in CEL. At the expense of retail investors, these methods might also have benefited Celsius insiders.
A probe into Celsius’ suspected price-fixing of CEL tokens is demanded by the financial watchdog since it “artificially inflated[ed] the worth of the company’s net position in CEL on its balance sheet and financial statements.” Despite the fact that Celsius formally filed for Chapter 11 bankruptcy in July, the DFR’s review of the platform’s balance sheet indicated that it might have been insolvent as early as May 13.
(With insights from Cointelegraph)