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.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 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.

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.

recent research

Unlocked Advisory-min.png

Research

This report distills Blockworks Advisory’s research on incentive programs and their analysis, offering a foundation for designing future initiatives and advancing industry-wide standards. By highlighting key lessons and methodologies, we aim to empower protocols to make informed, data-driven decisions.

article-image

Crypto is “really exciting,” former SEC Commissioner Paul Atkins said in a podcast interview last year

article-image

Bitcoin is now the “seventh most valuable asset in the world by market cap, just behind the likes of Google and Amazon,” GSR’s Brian Rudick said

article-image

Many analysts expected bitcoin to top $100K before year-end, though it’s been on a post-election tear

article-image

Will investors take a 10% lower return to get access to a regulated investment wrapper?

article-image

Brian Armstrong called out the hire of Gurbir Grewal, who had been the SEC’s enforcement division director since 2021

article-image

Certain senators will be interested to learn about Atkins’s private sector business interests, specifically those related to crypto