Celsius Network, the bankrupt cryptocurrency lender, may have hidden its financial trouble from investors and "engaged in the improper manipulation of the price" of the platform's digital tokens to boost the company's balance sheet and financials, according to a new court filing.
The Vermont Department of Financial Regulation submitted the
The latest filing showed that, based on a preliminary analysis of financial records, Celsius posted "massive losses" in the first seven months of 2021 and experienced "two material adverse events" in June and July of that year. It also said the company had kept its losses from investors, despite an obligation under state and federal laws to disclose its financial statements.
The filing also alleged that Celsius may have manipulated the price of its CEL token. The move may have "artificially" inflated the company's CEL holdings on its balance sheet. The company "never earned enough revenue to support the yields being paid to investors," the filing said.
Alex Mashinsky
"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. "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."
After the Office of the Comptroller of the Currency cracked down on a $2.8 billion-asset bank, industry observers expect more scrutiny of the ties between banks and financial technology startups.
Vermont and other state regulators are "especially concerned" about losses suffered by Celsius's retail investors, including those who have invested their college funds or retirement accounts with the bankrupt firm.
"The appointment of an examiner is critical to ensure the interests of these investors are protected," the filing said.
Bloomberg
