Celsius booted out in latest US digital currency lending purge

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It started with a crackdown on BlockFi, but now, the war on digital currency lending is setting its sight on other companies. The latest is Celsius and it’s the New Jersey authorities that once again kick-started a wave of enforcement actions against it. Now, Texas and Alabama have joined in, and Celsius could be looking at its last days serving U.S. users.

On Friday, the New Jersey Bureau of Securities ordered Celsius to halt “the offer and sale of interest-bearing investments.” The order stated that Celsius, which is based in London, has been funding its digital currency lending operations in part through the sale of unregistered securities. Those unlawful sales have raised at least $14 billion for the firm, the bureau stated.

“If you sell securities in New Jersey, you need to comply with New Jersey’s investor-protection laws. Companies dealing in cryptocurrencies are not immune from oversight,” Acting Attorney General Andrew Bruck stated.

The new cease and desist order against Celsius comes barely two months since New Jersey issued a similar one against BlockFi, yet another digital currency lender. Just as with the latest one, the state accused BlockFi of allegedly selling unregistered securities. 

And just like the last time, once New Jersey issued the first warning, other states lined up with similar orders against Celsius. 

The Texas State Securities Board was the first to issue an official notice announcing that a hearing will be held on February 14, 2022, to determine whether the regulator should issue a cease and desist order against the company. TSSB said Celsius has been offering interest-bearing accounts whose interest rates have been advertised to be as high as 17.78%.

Alabama also issued a show-cause order to Celsius. The Alabama Securities Commission wants to know why Celsius believes that its products don’t constitute the sale of securities under the state law, and it gave the company four weeks to respond. If it fails to, the regulator will assume it has waived its right to a hearing and proceed to impose sanctions.

A spokesperson for Celsius was quoted by one news outlet, “We are disappointed these actions have been filed and wholeheartedly disagree with the allegations being made that Celsius has not complied with the law. We always have, and will continue to, work with regulators in the U.S. and globally to operate in full compliance with the law.”

The spokesperson also assured users that the services will remain uninterrupted for now, despite the regulatory red flags.

Alex Mashinsky, the founder and CEO of the firm, claimed that he looks forward to working with regulators to find the best way forward for the digital currency lending industry. He believes that digital currency lending protocols are a godsend for their users as they are democratizing the gains that the wealthy investors have been reaping.

“They should be cheering for us as we’re effectively helping redistribute wealth and provide opportunity for everybody, not just the 1%,” he said in an ask-me-anything session.

https://twitter.com/Mashinsky/status/1439001193481523205

It’s not just the pure lending companies that regulators are going after, however. As CoinGeek reported, the U.S. Securities and Exchange Commission (SEC) recently warned Coinbase that it would face enforcement actions over its proposed Coinbase Lend product, resulting in the exchange to scarp its plan to launch the product.

In a blog post, the exchange, which is the largest in the U.S. and the first to trade publicly on Nasdaq revealed it had received a Wells notice, which essentially lets a company known that the regulator is aware it has breached the law and is coming after it.

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