DFR Says Celsius Network Is “Deeply Insolvent”

Vermont Department of Financial Regulation (DFR) said it believes cryptocurrency lender Celsius Network is “deeply insolvent” and does not have assets and liquidity to honor its obligations to customers and other creditors, Reuters reported.

According to Reuters: The crypto lender has been involved in an unregistered securities offering, selling cryptocurrency interest accounts to retail investors including investors in Vermont. Celsius also lacks a money transmitter license and until recently was operating largely without regulatory oversight.

The Vermont Department of Financial Regulation (DFR) posted information titled: “DFR Encourages Celsius Network Investors To Proceed With Caution”.

Here are some key points from that information:

“Celsius Network is a cryptocurrency company, unlicensed in Vermont, that offered its customers interest-bearing accounts. Celsius promised customers high interest rates (up to 17%) on deposits of cryptocurrencies. On June 12, 2022, Celsius announced that it was pausing all withdrawals, swaps, and transfers between customer accounts. This action impacts hundreds of thousands of customers and billions of dollars of cryptocurrencies, including accounts of some Vermonters.

“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 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 the investments are probably inadequate to cover its outstanding obligations.

“In addition, the Vermont Department of Financial Regulations also stated that Celsius Network had been operating in multiple jurisdictions, including Vermont. The Department believes that Celsius has been engaged in an unregistered securities offering by offering cryptocurrency interests to retail investors. Celsius also lacks a money transmitter license.”

CNBC reported that Celsius has started the process of filing for Chapter 11 bankruptcy protection after a month of turmoil. CNBC also reported that, In a Wednesday statement, Celsius said it would look to stabilize its business by restructuring in a way “that maximizes value for all stakeholders.” Celsius said it has $167 million in cash on hand to support operations in the meantime.

According to CNBC, “Wednesday’s news marks the latest high-profile crypto bankruptcy as prices plummet.”

Personally, I don’t think people who put a lot of cryptocurrency into Celsius are ever going to be able to obtain it. A bankruptcy filing could potentially mean that Celsius could get out of paying whatever it owed to customers.