US regulators believe embattled cryptocurrency lender Celsius Network has misled investors about its financial situation, according to a report published Friday by The Wall Street Journal.
Cryptocurrency Company Celsius Allegedly Extends Bankruptcy to 2020
Chief financial officer Chris Ferraro, during his testimony, announced that the company’s financial losses extended to 2020.
Although Celsius’s bankruptcy was precipitated by this summer’s crash in the cryptocurrency market, the company’s collapse began much earlier, according to reports.
At the same time, company management, including CEO Alex Mashinsky, continued to make optimistic statements about the lender’s financial health. Last year, Mashinsky claimed the firm was in profit, despite dealing with “catastrophic” losses at the time.
Celsius was not generating enough revenue to cover the high rates of return, which was a major attraction for customers. In fact, the company had to use new investor funds to pay interest.
The report states that this could potentially qualify as securities fraud.
The company filed for bankruptcy in mid-July.
Mashinsky confirmed that the company had a $1.2 billion deficit in its balance sheet.
In early September, Celsius asked the court to continue withdrawals for some users. The company said this was only the first step towards getting customers’ money back.
Celsius abruptly suspended withdrawals on June 12, which brought the company to an end.
The bankrupt cryptocurrency lender had approximately $12 billion worth of assets under management as of May.
*Not investment advice.
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