Vermont's Department of Financial Regulation (DFR) on Tuesday said it believes cryptocurrency lender Celsius Network is "deeply insolvent" and does not have the assets and liquidity to honor its obligations to customers and other creditors.
The crypto lender has been involved in an unregistered securities offering, selling cryptocurrency interest accounts to retail investors including investors in Vermont, it said in a statement.
Celsius also lacks a money transmitter license and until recently was operating largely without regulatory oversight, it said.
"Due to its failure to register its interest accounts as securities, Celsius customers did not receive critical disclosures about its financial condition, investing activities, risk factors, and ability to repay its obligations to depositors and other creditors," the regulator said.
Celsius did not immediately respond to Reuters' request for comment.
The state agency said it has now joined a multistate investigation of Celsius.
State securities regulators in Alabama, Kentucky, New Jersey, Texas and Washington are investigating Celsius's decision to suspend customer redemptions.
Last month, Celsius froze withdrawals and transfers, citing "extreme" market conditions, leaving its 1.7 million customers unable to redeem their assets.
The retail crypto lending platform later said it was exploring options including deals and restructuring its liabilities.
Several cryto companies have run into difficulties after a sharp sell-off in the market for digital currencies seen in recent months.
(Reporting by Shivani Tanna in Bengaluru; Editing by Edwina Gibbs)