Celsius Network does not have enough assets to pay off its liabilities and is likely to face a lawsuit

The Celsius Network platform is insolvent and will not be able to pay its debts. This is claim of the Vermont Financial Regulatory Authority (DFR) published two days ago.

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Celsius Network does not have enough assets

According to the regulator, Celsius does not have sufficient assets or liquidity to meet its obligations to account holders and other creditors. The documentary also criticizes the attitudes of the company, which threatened its clients' money.

“Celsius has deployed client assets in a variety of risky and illiquid investments, trading and lending. To exacerbate the risks, the company used client assets as collateral for other loans used in leveraged investment strategies,” the statement added.

Celsius is one of the cryptocurrency lending platforms facing financial problems due to liquidity crises. The company suspended withdrawals on June 12 and is now struggling to pay its debts.

However, Celsius was able to free up important collateral by paying off old debts. The latest of these was on Tuesday, when the company paid off its debt in decentralized finance (DeFi) protocol Aave.

Afterwards, Celsius released $26 million worth of cryptocurrencies, which can then be returned to customers. The company also moved $418 million in staking ether (stETH) to an unknown wallet.

Last week, Celsius fully repaid its debt to the Maker protocol, releasing $440 million in collateral denominated in WBTC tokens.

This means that Celsius Network is gradually managing to free up collateral that can be used to pay off the company's liabilities, but this will likely not be enough.

Does Celsius face a new trial?

But the company's problems are far from over. According to DFR, Celsius is involved in an unregistered bond offering, which could lead to new litigation for the company.

In this regard, the interest on cryptocurrencies paid by the company in its accounts aimed at retail investors requires permission. But Celsius did not have such a license, which in practice means that its operation is illegal.

Celsius is also not licensed to operate a money transfer service, the DFR claims, noting that Celsius has therefore operated largely without regulatory oversight. In addition, the company also failed to record its interest-bearing accounts as bonds, resulting in insufficient disclosure of the risk to depositors and other creditors.

Due to the heightening of concerns about Celsius, the DFR joined a multi-state investigation to look into the company's activities.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.