As Celsius’ bankruptcy case drags on, more and more evidence of financial misconduct – or at the very least, mismanagement – seems to be coming to light.
Prior reports had already indicated that the company’s real financial situation is far direr than originally stated.
In the most recent turn of events, regulators from Vermont have hopped on the case, claiming that, in reality, Celsius’ financial woes stretch as far back as 2019, despite the very strong bull market happening at the time.
The document accuses Celsius of failing to comply with laws regulating securities and misleading investors with regard to the safety of their funds and the ability of Celsius to deliver on promises to consumers.
According to the pursuant, Chris Ferraro – the CFO of Celsius – admitted to the court that financial troubles began with losses taken in 2020 and 2021, in direct contradiction to prior claims that the company’s bankruptcy is due to the market crash of 2022.
More importantly, Ferraro also allegedly stated that Celsius was never profitable enough to pay out the promised yields, going by investments alone.
“Celsius also admitted at the 341 meeting that the company had never earned enough revenue to support the yields being paid to investors. This shows a high level of financial mismanagement and also suggests that at least at some points in time, yields to existing investors were probably being paid with the assets of new investors.”
Although this business model has often been seen with Uber and other companies openly relying on venture capital to stay in business, in the case of financial firms promising huge yields, a certain phrase is often used – more specifically, a Ponzi scheme.
According to the document presented earlier, Celsius repeatedly increased its net position of CEL by purchasing hundreds of millions of dollars worth of its own token. Furthermore, Ferraro also admitted that the rapid decline in CEL price was a major factor contributing to the firm’s insolvency.
According to Ethan McLaughlin, an attorney representing the state of Vermont in the case, the value of Celsius’ equity dropped by hundreds of millions between the 13th of May 2022 and the 13th of June alone.
Although – assuming goodwill on the part of Celsius – this may not have been anything but a regular investment, McLaughlin’s preliminary report indicates that if CEL tokens are excluded from the count, the company’s liabilities exceed all available assets.
“If Celsius’ Net Position in CEL is excluded, its liabilities exceed its assets in all of the Freeze Reports and Preliminary Balance Sheets provided to state regulators.”
The statement by Vermont regulators was signed on the 7th of September and is yet another development to complicate the ongoing bankruptcy case of one of the biggest players in the history of crypto.