Crypto Lender Celsius Network Under Investigation By Various States After Customer Transactions Freeze
Celsius Network users aren’t the only ones who want to know why the company froze withdrawals.
The state safety boards of Alabama, Kentucky, New Jersey, Texas and Washington have reportedly recently launched investigative inquiries into the cryptocurrency lender to find out why it froze withdrawals this week, according to Reuters.
Celsius Network is no stranger to investigative inquiries from state and federal authorities, with several states ordering the company to stop selling “high-yield crypto products” due to the risk associated with them, per Engadget.
Celsius Network Investigation Probe Details
State securities regulators in the previously mentioned states have decided to launch inquiries into Celsius Network to investigate the company’s decision to suspend customer redemptions this week, according to the statement from the Texas State Securities Director of Enforcement. Board, Joseph Rotunda.
Officials from the various state securities boards met and began an investigation into the firm’s freeze on the morning of June 13, with Rotunda considering the investigation a “priority.”
Rotunda also said he was concerned that clients and many retail investors could withdraw from their accounts despite needing immediate access to their assets, which could have “significant financial consequences”.
Alabama Securities Commission Director Joseph Borg also told Reuters that Celsius Network had been “very responsive” to questions from state securities regulators. However, Borg added that the investigation is in its early stages and as such things could still change at this point.
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Borg also added that the United States Securities and Exchange Commission (SEC) is also communicating with Celsius Network. However, the SEC declined to comment on its correspondence with Celsius Network.
A spokesperson for the Kentucky Department of Financial Institutions said it was SEC policy not to comment on ongoing enforcement actions and investigations.
Celsius Network and its CEO, Alex Mashinsky, have yet to comment on the proceedings.
Decision to freeze the withdrawal of Celsius
Celsius Network mentioned in a memo that it would freeze customers’ ability to withdraw, exchange and transfer funds from their accounts due to extreme market conditions and put the company in a “better position” to eventually meet its obligations. withdrawal obligations.
The company added that its decision to freeze withdrawals is necessary “for the benefit of our entire community” to stabilize liquidity and operations while taking steps to preserve and protect assets.
Customers will continue to receive rewards during the withdrawal freeze as part of Celsius Network’s commitment to them.
“We understand that this news is difficult, but we believe that our decision to suspend withdrawals, exchanges and transfers between accounts is the most responsible action we can take to protect our community,” said Celsius Network. “Our ultimate goal is to stabilize liquidity and restore withdrawals, swaps and transfers between accounts as quickly as possible. »
The crypto-lending company is currently facing an apparent liquidity crisis as the price of Bitcoin has fallen to pre-pandemic levels, per Quartz.
Celsius Network’s business model promises high returns on customer deposits, enticing them with huge rates for cryptocurrency deposits. The company would then lend these deposits to other customers, which would be backed by Bitcoin, but it cannot guarantee customers that it can pay out in the event of a withdrawal rush.
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