Vermont Regulator Urges Caution With Celsius Network for Bankruptcy Likelihood

The Department of Financial Regulation (DFR) in Vermont today issues a warning against Celsius Network, a cryptocurrency lending platform that paused withdrawals, swaps, and transfers between customer accounts in June, citing "extreme market conditions".

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The Department believes Celsius is deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors. Celsius deployed customer assets in a variety of risky and illiquid investments, trading, and lending activities. Celsius compounded these risks by using customer assets as collateral for additional borrowing to pursue leveraged investment strategies.

Additionally, some of the assets held by Celsius are illiquid, meaning they may be difficult to sell, and a sale may result in financial losses. The company's assets and investments are probably inadequate to cover its outstanding obligations.  

The Department also believes Celsius has been engaged in an unregistered securities offering by offering cryptocurrency interest accounts to retail investors. Celsius also lacks a money transmitter license. This means that until recently, Celsius was operating largely without regulatory oversight.

The regulator highlights that Vermont investors should be very wary of communications purporting to come from Celsius, including suggestions they place accounts in "HODL mode",  invest more in CEL tokens, or otherwise take actions which require them to pay additional sums.