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Government securities regulators investigating the freezing of Celsius accounts



(Reuters) – State securities regulators in Alabama, Kentucky, New Jersey, Texas and Washington are examining cryptocurrency lender Celsius Networks’ decision this week to suspend client redemption, Texas Rotunda, chief executive of the Texas State Securities Board, told Reuters on Thursday.

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

Celsius said that due to extreme market conditions, it paused withdrawals, swaps and transfers between accounts. The company said it would do so “in a better position to meet its withdrawal obligations over time.”

“I am very concerned that clients ̵

1; including many private investors – may need to access their assets immediately but will not be able to withdraw their accounts. The inability to access their investment could result in significant financial consequences,” he said.

Joseph Borg, head of the Alabama Securities Commission, also told Reuters that securities regulators in Alabama, Texas, New Jersey and Kentucky were investigating the matter. Celsius has been sensitive to questions from the supervisory authorities, but that the investigation is in the initial stage, he said.

Mr Borg added that the US Securities and Exchange Commission has also been in communication with Celsius.

The SEC declined to comment. The securities regulators in New Jersey and Washington did not immediately respond to requests for comment. A spokesman for the Kentucky Department of Financial Institutions said it was their policy not to comment on ongoing enforcement actions and investigations.

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

Mr Rotunda said he and his team learned of the move by New Jersey-based Celsius to freeze user withdrawals from the company’s blog post and announcement on Twitter on Sunday night, saying the company needed to take steps to “stabilize liquidity.”

In September, regulators in Kentucky, New Jersey and Texas struck Celsius with an order to discontinue and waive, arguing that its interest-bearing products should be registered as a security. In February, the SEC and the same state regulator fined BlockFi $ 100 million for failing to register its cryptocurrency product.

Like a bank, Celsius collects cryptocurrencies from private customers and invests them in the equivalent of the wholesale cryptocurrency market, including “decentralized finance” or DeFi, sites that use blockchain technology to offer services from loans to insurance outside the traditional financial sector.

Celsius promises private customers huge returns, sometimes as much as 18.6% per year. The lure of large profits has led individual investors to pour assets into Celsius and similar platforms.

Mr. Mashinsky said in October that Celsius had $ 25 billion in assets. That number had dropped to about $ 11.8 billion from last month, the Celsius website showed.

Celsius appears to have stumbled upon some of its wholesale crypto investments, according to public blockchain information and analysts tracking such data. When these investments deteriorated, the company could not meet redemptions from customers who fled in the midst of the broader downturn in the crypto market, analysts said.

Cryptocurrencies have lost more than $ 400 billion since TerraUSD, a major stable currency pegged to the US dollar, collapsed in May. Bitcoin fell to an 18-month low on Wednesday to $ 20,079.72. It has fallen by about 70% from the record high of $ 69,000 in November.


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