EXCLUSIVE State securities regulators investigate freezing of Celsius accounts

WASHINGTON, June 16 (Reuters) – Securities regulators in the states of Alabama, Kentucky, New Jersey, Texas and Washington are this week investigating crypto lender Celsius Network’s decision to suspend customer buyouts , Joseph Rotunda, director of enforcement at the Texas State Securities Board, told Reuters. Thursday.

Officials met and began investigating the case on Monday morning, Rotunda said, adding that he considered the investigation a “priority”.

Celsius said that due to the extreme market conditions, it was suspending withdrawals, trades and transfers between accounts. The company said this would put it “in a better position to meet, over time, its withdrawal obligations.” Read more

Join now for FREE unlimited access to Reuters.com

Register

“I am very concerned that clients – including many retail investors – may need immediate access to their assets but may not be able to withdraw from their accounts. The inability to access their investment can have significant financial consequences,” he said.

Alabama Securities Commission Director Joseph Borg also told Reuters that securities regulators in Alabama, Texas, New Jersey and Kentucky were investigating the matter. Celsius has responded to questions from regulators, but the investigation is still in its early stages, he said.

Borg added that the United States Securities and Exchange Commission was also in communication with Celsius.

The SEC declined to comment. Securities regulators in the states of New Jersey and Washington did not immediately respond to requests for comment. A spokesperson for the Kentucky Department of Financial Institutions said its policy is not to comment on ongoing enforcement actions and investigations.

Celsius and CEO Alex Mashinsky did not immediately respond to a request for comment.

Rotunda said he and his team learned of New Jersey-based Celsius’s decision to freeze user withdrawals from the company’s blog and Twitter announcement on Sunday night, which said the company should take measures to “stabilize liquidity”.

In September, regulators in Kentucky, New Jersey and Texas hit Celsius with a cease and desist order, arguing that its interest-bearing products should be registered as a security. In February, the SEC and those same state regulators fined BlockFi $100 million for failing to register its crypto lending product.

Similar to a bank, Celsius gathers crypto deposits from retail customers and invests them in the wholesale crypto market equivalent, including “decentralized finance” or DeFi, sites that use blockchain technology to offer services. ranging from loans to insurance outside the traditional financial sector. . Read more

Celsius promises retail clients huge returns, sometimes as high as 18.6% per year. The lure of big profits has led individual investors to pour assets into Celsius and similar platforms.

Mashinsky said in October that Celsius had $25 billion in assets. That figure had fallen to around $11.8 billion last month, according to the Celsius website.

Celsius appears to have stumbled on some of its wholesale crypto investments, according to public blockchain information and analysts who track this data. As those investments deteriorated, the company was unable to meet redemptions from fleeing customers amid the broader crypto market crisis, analysts said. Read more

Cryptocurrencies have lost more than $400 billion since TerraUSD, a major US dollar-pegged stablecoin, crashed in May. Bitcoin fell to an 18-month low on Wednesday at $20,079.72. It has fallen around 70% from its record high of $69,000 in November. Read more

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Hannah Lang; Editing by Richard Chang, Nick Zieminski, Michelle Price and Diane Craft

Our standards: The Thomson Reuters Trust Principles.

Comments are closed.