40 State Regulators are Opening Celsius’ Books in Search of Fraud

Vermont’s Department of Financial Regulation alleges Celsius misled investors about the state of its financial health and baited them into leaving their funds on the platform

article-image

Blockworks exclusive art by axel rangel

share

key takeaways

  • Vermont joins 40 other state regulators in their pursuit of Celsius’ true financials
  • Celsius’ liabilities may have exceeded its assets as far back as February 2019, Vermont’s regulator alleges

Vermont is requesting the appointment of an examiner with “broad powers” to further investigate embattled crypto lender Celsius and its financials.

The Vermont Department of Financial Regulation alleged Wednesday the lender manipulated the price of its CEL token and used investor deposits to boost its net position in them, according to a court filing, first reported by Coindesk.

Celsius filed for chapter 11 bankruptcy in July after a month-long battle to stay solvent following Terra’s collapse. The court proceedings that followed have exposed a $3 billion hole in its balance sheet.

The regulator alleges Celsius misled investors on the state of its financial health which “likely” baited retail investors into keeping their funds on its platform, irrespective of the crypto market’s wild price swings.

Roughly 100,000 creditors are also reportedly owed money by the lender after they lent the firm unsecured cash loans. Sam Bankman-Fried’s trading firm, Alameda Research, is one of the high-profile lenders caught in the cross hairs.

“At a minimum, Celsius has been operating its business in violation of state securities laws, the regulator said in its filing. “That improper practice alone warrants investigation by a neutral party.”

The regulator also alleges Celsius’ liabilities may have exceeded its assets since at least February 2019, before taking into account its net position in CEL tokens. The practice of artificially inflating its token led to the potential enrichment of insiders at the expense of retail investors, Vermont’s regulator said.

That revelation has some commentators calling the operation a Ponzi scheme.

Loading Tweet..

Vermont joins at least 40 other state securities regulators in a multistate investigation of potential securities fraud, mismanagement and market manipulation, the filing reads.

Losses suffered by retail investors and savers, which include middle class unaccredited investors, some of whom parked their life savings on the platform, are the focus of Vermont’s fight, the financial watchdog said.

“The appointment of an examiner is critical to ensure the interests of these investors are protected.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

REPORT_Template.png

Research

The Sonic blockchain is leveraging redesigned airdrop incentives and its FeeM program to propel DeFi activity and attract institutional capital, setting the stage for ecosystem growth. Within this environment, leading protocols Shadow Exchange and Silo are poised to asymmetrically benefit due to innovative features and favorable valuations, despite facing ecosystem dependency and competitive pressures. This positions them as compelling, potentially shorter-term, investment opportunities contingent on Sonic's sustained success.

article-image

Sponsored

The blockchain creates a fair environment where AI agents and users can access deep liquidity without MEV or other forms of value extraction

article-image

After upping its offer multiple times, Circle is finally trading on the NYSE

article-image

Circle goes public on the NYSE Thursday — here’s what to expect

article-image

Sponsored

WalletConnect is the default for secure, scalable onchain interaction — but this isn’t a peak, it’s the launchpad

article-image

Circle’s stock is expected to price at $31 and will go public on the NYSE Thursday