A financial regulator in Vermont has all but said that bankrupted Celsius Network LLC resembled a Ponzi scheme at times, alleging the crypto lender had used new investor funds to repay previous investors, as well as misled investors about its financial health and bolstered its balance sheets by using its CEL token.

See related article: Celsius on thin ice well before its bankruptcy: CNBC report

Fast facts

• These claims were made by the Vermont Department of Financial Regulation in a filing on Wednesday in support of the U.S. Trustee’s Office motion to appoint an independent examiner, due to alleged concerns over Celsius’ financial transparency amid ongoing bankruptcy proceedings.
  

• “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,” the filing said.
  

• According to the filing, Celsius had been unable to repay investors back as far as July 2021 when the company suffered significant losses that it subsequently sought to cover up.
  

• Regulators also allege the company may have manipulated the price of its CEL token and increased its holdings to boost its balance sheets.
  

• Celsius filed for Chapter 11 bankruptcy in the Southern District of New York in mid-July after months of uncertainty amid the contagion effect that rippled through the crypto industry following the multi-billion-dollar collapse of algorithmic stablecoin project Terra/Luna.
  

• This follows Celsius cofounder Daniel Leon declaring the entirety of his equity stake in the company as “worthless” on Monday in a document filed with the United States Bankruptcy Court.

See related article: Celsius files for bankruptcy after closing DeFi loans