The Vermont Department of Financial Regulation has filed a court filing accusing cryptocurrency lending service Celsius of operating in a pyramid scheme.
The regulator asked the court to appoint a special representative to participate in the Celsius bankruptcy case. However, shareholders of the service objected to this proposal and demanded to reduce the cost of the bankruptcy case so as not to waste the company’s money.
The agency also said that Celsius CEO Alex Mashinsky misled users about the company’s financial condition. Mashinsky claimed that user funds were safe, while the company “was already insolvent.”
According to the regulator, Celsius “never made enough profit.” This speaks to grossly mismanaged finances, and also suggests that, at least at some points, the returns of existing investors were paid for by new ones.”
Currently, financial regulators in 40 states are investigating Celsius in connection with the bankruptcy case, as well as “possible unreported activities with securities.”
Earlier, the Celsius management spoke about the intention to unlock and return the funds of some users who stored cryptocurrencies on the platform through the court.