Digital Assets: Regulators Investigating Withdrawals Ban By Celsius

June 17, 2022 | Digital Assets, News
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An Exclusive Reuters report said securities regulators from five states were investigating Celsius on a “priority” basis.

The decision by Celsius to ban customer redemptions, due to “extreme market conditions,” is under regulators’ lens in the states of Alabama, Kentucky, New Jersey, Texas and Washington. Joseph Rotunda, enforcement director at the Texas State Securities Board confirmed this to Reuters on Thursday. (Reuters)

Under its business model Celsius receives crypto deposits from retail investors at high rates of interest and invests these in DeFi sites that offer products such as loans and insurance.

As of May 31, Celsius reported $11.8 billion of assets.

It is plausible that some of Celsius’ investments may have run aground, and the company was therefore unable to meet demands of redemption from panicked depositors rushing for the exits amidst the crash in value of cryptos.

Retail investors in difficulty

“I am very concerned that clients – including many retail investors – may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences,” Rotunda said.

Alabama Securities Commission Director Joseph Borg said that the SEC was also in touch with the crypto lender.

Similar situation playing out in 3AC?

According to reports, venture firm Three Arrows Capital (3AC) has failed to pay up margin calls from its lenders, and may be forced into insolvency. Lenders have therefore resorted to forced liquidations, and one of these parties is said to be crypto lender BlockFi, which loaned bitcoin to 3AC.

According to one estimate, as much of $400 million of 3AC positions may have been liquidated.

Related Story: Celsius Bars Withdrawals; Cryptos Melt; Bitcoin Crashes To $23,662

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