Vermont’s Department of Financial Regulation (DFR) issued a warning against troubled crypto lending firm Celsius on Tuesday, reminding users that the crypto lending firm is not licensed to offer its services in the state.

The DFR alleged that Celsius is “deeply insolvent” and doesn’t possess “assets and liquidity” to fulfill its obligations toward the customers. The state regulator accused the crypto lender of mismanaging customers’ funds by allocating them toward risky and illiquid investments:

“In addition to the ordinary risks of cryptocurrency investing, holders of Celsius interest accounts were also exposed to credit risk that Celsius would not be able to return their tokens upon withdrawal.”

The financial regulator noted that the high crypto interest account offered by Celsius qualifies as unregistered security and the firm also lacks a money transmitter license to offer any investment services in the state.

DFR believes Celsius operated without any regulatory oversight and exposed retail customers to high risks investments resulting in heavy losses for them. Keeping these concerns in mind, the state financial regulator has joined the multi-state investigation against the troubled crypto lender:

“The Department believes Celsius has been engaged in an unregistered securities offering by offering cryptocurrency interest accounts to retail investors. Celsius also lacks a money transmitter license. The Department has joined a multistate investigation of Celsius arising from the above concerns.”

Vermont became the sixth state in America to open an investigation into Celsius’ crypto interest rate accounts. As Cointelegraph reported earlier, Alabama, Kentucky, New Jersey, Texas and Washington opened investigations into the troubled crypto lender after it paused all withdrawals, swaps and transfers between accounts on June 13, just a day after its chief executive officer Alex Mashinsky claimed all is well with the firm.

Related: Risky business: Celsius crisis and the hated accredited investor laws

Celsius became one of the key crypto lenders in the industry during the bull market, managing billions in customers’ funds and churning out high interet rates for account holders. While regulators and analysts did warn about risks associated with such high lending products, crypto lenders continued to play it down, claiming it was a ploy of greedy bankers.

A recent report in Financial Times highlighted that Celsius aggressively bet with client funds, putting them in risky decentralized finance (DeFi) yield products. The crypto lender’s compliance team had flagged concerns as early as February 2021, where internal documents showed that employees were allowed to invest in funds without gaining explicit permission and without any compliance checks. This reportedly helped the firm to disguise its losses.

However, with the advent of the bear market in May initiated by the Terra ecosystem crash, the faults started to show up. Several reports have highlighted that market conditions are not the only reason for the downfall of crypto-lending firms like Celsius. In fact, it was mismanagement and unethical business practices on their part that have brought them to this point.

Celsius is currently hiring new legal teams and working on restructuring plans to avoid bankruptcy. The firm has also worked on repayment of several DeFi loans over the past couple of weeks, having paid 20 million in USD Coin (USDC) to Aave on July 11 and paid the remaining $41.2 million debt to Maker protocol on Thursday, freeing up more than $500 million in Wrapped Bitcoin (wBTC) collateral.