Vermont state officials in the US have called for a “deeper” investigation into the bankrupted Celsius as it artificially inflated the price of its CEL token going back over three years.
Ethan McLaughlin, Vermont assistant general counsel, in a Wednesday filing, said by increasing its Net Position in CEL by hundreds of millions of dollars, Celsius increased and propped up the market price of CEL. This artificially inflated the company’s CEL holdings on its balance sheet and financial statements. He said liabilities would have exceeded its assets since at least February 28, 2019. McLaughlin believes that these practices may have enriched Celsius insiders at the expense of retail investors.
Moreover, Celsius through its CEO Alex Mashinsky made false and misleading claims about the company’s financial health, profitability, ability to meet its obligations, and compliance with securities laws. The filing says that this likely induced retail investors to invest in Celsius, or to leave their investments in the company despite concerns about the volatility of the cryptocurrency market. Regulators have also highlighted Mashinsky’s May 2022 tweet wherein he claimed that the exchange has not experienced any significant losses and all funds are safe. McLaughlin believes the company lacked sufficient assets to repay its obligations and further saw unrealized losses of $454 million between May 2 and May 22, 2022.
It should be noted that Chris Ferrano, the CFO of Celsius, said the company’s insolvency started with financial losses in 2020. The financial troubles may go back further. The company never had enough revenue to support the yield being paid to investors, thus a Ponzi scheme. Regulators say this shows a high level of financial mismanagement. It also suggests that yields to existing investors were probably being paid with the assets of new investors. Celsius filed for bankruptcy in June.