Celsius Still in Hotspot Despite Repayments and Is ‘Likely Deeply Insolvent,’ Regulator Claims
Despite recent attempts to pay off its debts in an apparent bid to get its hands on locked-in collateral, in the United States, the Vermont Department of Financial Regulation (DFR) has issued a scathing consumer alert, where it stated that Celsius is “very likely” to be “deeply insolvent.”
The DFR, which said that some Vermont residents had been affected by Celsius’ decision earlier this summer to suspend withdrawals, added that it believed the firm “lacks the assets and liquidity to honor its obligations to account holders and other creditors.”
The DFR wrote:
“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 added that it has joined a “multi-state investigation of Celsius” as a result of its “concerns.”
That probe may or may not be linked to an investigation launched by the Californian Department of Financial Protection and Innovation (DFPI), which says it is now looking into a number of United States-based crypto lending firms.
In a press release, the DFPI refrained from mentioning the names of any of the companies it is looking into, instead stating that it was looking into “multiple” firms.
The department wrote that it thinks these firms “may not have adequately disclosed risks customers face when they deposit cryptoassets”
The DFPI further advised users on how to file formal complaints against crypto lenders if they live in California, and added that it was now investigating “whether other crypto interest account providers are violating laws” under its jurisdiction.
The DFPI has previously looked into the activities of other firms in the crypto space, namely BlockFi and Voyager Digital – and concluded that some of the crypto interest accounts offered on such platforms “were unregistered securities.”
Meanwhile, Celsius will hope to boost its solvency hopes with a move to pay off the rest of its debts. After earlier paying back some USD 78.1m worth of USD coin (USDC) to the lending protocol Aave (AAVE), Celsius yesterday paid off the remainder of its debt to Aave.
Nansen data shows that Celsius coughed up USD 8.4m worth of USDC on July 12. This move has released some USD 26m worth of crypto collateral.
And there are also developments on one of the other key players in the crypto turmoil world – the troubled crypto hedge fund Three Arrows Capital (3AC).
Yahoo Finance reported that a United States district court judge ruled that 3AC may not transfer or dispose of its America-based assets while “court-appointed liquidators” investigate. In Tuesday's hearing, Glenn Martin, a judge for the Southern District of New York overseeing the firm's Chapter 15 bankruptcy, made a ruling that prevents the firm from transferring or disposing its assets located in the US, per the report. The only US assets of 3AC found so far include a legal retainer with the New York law firm Dan Tan Law as well as "rights under a variety of New York law loan agreements," it added.
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