Digital Assets: State Regulators Take Aim At Crypto Companies Including Celsius
The Department of Financial Regulation, State of Vermont, believes “Celsius is deeply insolvent.”
The Department of Financial Regulation (DFR) in the State of Vermont and the Department of Financial Protection & Innovation (DFPI), California, have both issued on July 12 cautionary notices regarding crypto companies that have suspended withdrawals amidst the meltdown in the crypto assets market.
The DFR said the Celsius Network, which offered interest as high as 17% on crypto deposits, had impacted “hundreds of thousands of customers and billions of dollars of cryptocurrencies, including accounts of some Vermonters,” by pausing all withdrawals, swaps, and transfers between customer accounts effective June 12.
In a hard-hitting Consumer Alert, DFR said it believed that Celsius was “deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors.”
“Celsius deployed customer assets in a variety of risky and illiquid investments, trading, and lending activities. Celsius compounded these risks by using customer assets as collateral for additional borrowing to pursue leveraged investment strategies,” the regulator alleged.
It further said Celsius was “operating largely without regulatory oversight,” because it lacked a money transfer license and “engaged in an unregistered securities offering by offering cryptocurrency interest accounts to retail investors.”
The DFR said it had joined a multistate investigation of Celsius.
The DFPI said it was investigating multiple companies nationwide that offer customers interest-bearing crypto asset accounts (commonly referred to as “crypto-interest accounts”), and that many of these companies are preventing customers from withdrawing from and transferring between their accounts.
“In recent actions against BlockFi and Voyager Digital, the Department found that certain crypto-interest accounts were unregistered securities,” the regulator said.
“The Department warns California consumers and investors that many crypto-interest account providers may not have adequately disclosed risks customers face when they deposit crypto assets onto these platforms,” it added.
It suggested that California customers of crypto-interest account providers that have slowed or paused withdrawals or transfers of crypto assets should “contact the Department.”
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