lol! The Chaos Effect, Crypto Dealers in the US are Investigated by Regulators
6/17/2022
Securities regulators in the United States (US), Alabama, Kentucky, New Jersey, Texas and Washington are investigating the decision by crypto lender Celsius Network to suspend withdrawals and transfers of investor funds earlier this week.
Local officials are currently investigating what caused the New Jersey-based crypto lending company to suspend withdrawals by investors and cause the crypto market to crash for the second time.
Celsius previously said that the temporary suspension of withdrawals, exchanges and transfers between accounts was due to extreme market conditions and made it impossible to withdraw funds. Another reason is to respect investors or clients.
"I am deeply concerned that clients, including many retail investors may need to quickly access their assets but be unable to make withdrawals. Not being able to access their investments could have significant financial consequences," Joseph Rotunda, director of enforcement at the Texas State Securities Board told Reuters .
He also said that the state securities regulators of Alabama, Texas, New Jersey and Kentucky were investigating the matter. Celsius has also answered the investigators' questions, but they have not taken them seriously.
Currently, the US Securities and Exchange Commission (SEC) is in communication with Celsius.
When asked by Reuters , the SEC declined to respond to the question. New Jersey and Washington state securities regulators also did not immediately respond to questions from Reuters .
However, a spokeswoman for the Kentucky Department of Financial Institutions responded that it was their policy not to comment on enforcement actions until the investigation was complete.
Rotunda and his team learned of Celsius' move to freeze user withdrawals from the company's press release and announcement on Twitter late Sunday, in which Celsius said the company needed to take action to stabilize its liquidity.
Whereas in September last year, Celsius was warned by the regulators of New Jersey, Texas, and Kentucky to stop promoting its loan products to the public in the US, where this was because the interest loan products had not been registered with local regulators. This must be done as a security if at any time Celsius commits a violation.
Celsus operates similarly to a banking company or financial services company. The difference is that they operate in a 'grey zone', where they will continue to operate as long as the regulator has not seriously tightened their operating license.
Celsius raises funds from retail investors in the form of crypto deposits, then the funds from these investors are invested in the crypto market in general, including in decentralized finance or DeFi assets.
Worse, Celsius promises returns for retail customers, sometimes up to 18.6% per year. The lure of these returns has caused retail investors to flock to Celsius and platforms other crypto lending
In October 2021, Celsius's assets reached US$ 25 billion or equivalent to Rp. 358.75 trillion (assuming an exchange rate of Rp. 14,350/US$). But last May, its assets fell to US$ 11.8 billion or around Rp. 171 trillion.
Celsius appears to have stumbled across some of its crypto investments since last year. When the crypto market crashed, many of its customers wanted to withdraw funds but couldn't because Celsius failed to fulfill its redemption.
