Celsius Network (CEL-USD) is limping along through bankruptcy. It has been duking it out with creditors, customers and lenders for months now as it tries to claw out of a financial hole. Now this week, Celsius is suffering another couple of blows. Regulators just accused Celsius of running like a Ponzi scheme. Meanwhile, one of CEL’s cofounders is making a declaration that will further complicate the bankruptcy proceedings.
When Celsius froze withdrawals in June, it was catapulted into crypto infamy. The company was one of the first to prevent investors from moving their funds, effectively buckling them into a downward plunge that most wanted to simply avoid by taking losses while they still could. At the time, the decision was framed as a way to protect investors’ assets. But as it became more apparent that Celsius was approaching bankruptcy, the move became more of an attempt at stabilization.
Fast forward and, after some back and forth with lenders and an aggressive debt repayment campaign, Celsius is still filing for Chapter 11 bankruptcy. Since July, the company has been promising to get itself back into a profitable space that can attract new shareholders. However, that’s proving easier said than done.
Many weeks of back and forth between Celsius and creditors in court have brought challenges to the company’s plan to mine its way out of debt. Ultimately, Celsius has secured go-ahead to do so from a judge. But the company has also dealt with multiple lawsuits and weighty accusations of fund mismanagement and more. Now, its woes are only persisting.
Celsius Network Navigates Accusations From Regulators
New bold claims are now beating this already downtrodden company. The Celsius Network’s latest hurdles? Regulators are paying close attention to the events that led up to its bankruptcy proceedings. Plus, CEL’s cofounder just threw another monkey wrench into the company’s court battle.
First off, Vermont’s Department of Financial Regulation evidently has beef with Celsius; the body just made this known with an eye-catching new filing. Essentially, state regulators say Celsius “misled investors about its financial health.” They also say the company used the CEL crypto to pad its balance sheet.
In fact, the department goes so far as to accuse Celsius of operating like a Ponzi scheme. “At least at some points in time, yields to existing investors were probably being paid with the assets of new investors,” the filing claims. According to the agency, the filing is the result of a multi-state investigation into the company’s practices leading up to its bankruptcy.
Meanwhile, Celsius cofounder Daniel Leon is causing an entirely different concern for this already-on-edge name. Recently, Leon submitted a filing to the court declaring his 32,600 common shares of the company “worthless.” Leon is likely using the filing in order to turn his holdings into a tax write-off, so this news may not mean anything for Celsius in terms of penalty. Still, it adds salt in the wound for the Celsius Network.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.