The Department of Financial Regulation (DFR) of the American state of Vermont said that cryptocurrency lender Celsius Network is “deeply insolvent,” stating that the lender lacks the resources and liquidity to fulfill its duties to account holders and other creditors.
As part of its most recent debt restructuring strategy, the lender said earlier on Tuesday that it has entirely paid off its debt on the decentralized financing (DeFi) network Aave, releasing $26 million in tokens in the process. Additionally, it sent $418 million in “stETH,” or staked ether, to an unknown wallet.
“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,” the DFR said in a statement.
Celsius pays loan on ‘Maker’
Last week, Celsius fully repaid and ended its loan on Maker, one of the biggest DeFi lending platforms, freeing approximately $440 million in wrapped bitcoin (WBTC) tokens that had been pledged as security. In addition, the cryptocurrency lender released 410,000 stETH tokens worth $426 million at the time of publication on Tuesday and lowered its debt on Aave by $95 million.
The DFR considers Celsius’s sale of bitcoin interest accounts to small-scale investors to be “an unregistered securities offering.” Additionally, DFR claims that Celsius does not have a money transmitter license, which indicates that Celsius previously operated mainly unregulated.
The lender also neglected to register its interest accounts as securities, which prevented depositors and other creditors from being informed of any risks. According to the statement, DFR has entered a multistate inquiry against the lender as a result of the convergence of the worries regarding Celsius.
Celsius is one of the cryptocurrency lenders experiencing financial difficulties in the most recent crypto liquidity crisis. Beginning in June, it stopped accepting withdrawals, made employment cuts, and hired restructuring consultants to offer advice on its financial predicament.