Securities regulators from 5 U.S. states have reportedly opened an investigation into crypto lending platform Celsius Network over its determination to droop consumer withdrawals.
According to a Thursday report from Reuters, Texas State Securities Board director of enforcement division Joseph Rotunda mentioned regulators in Alabama, Kentucky, New Jersey, Texas and Washington started investigating Celsius after the platform introduced it will be “pausing all withdrawals, swaps and transfers between accounts.” Rotunda reportedly referred to as the investigation a “priority” for the Texas regulator and confirmed to Cointelegraph the enforcement division was “trying on the problem involving the frozen accounts.”
“I’m very involved that shoppers — together with many retail traders — may have to instantly entry their property but are unable to withdraw from their accounts,” the enforcement director reportedly mentioned. “The inability to access their investment may result in significant financial consequences.”
The report on a possible investigation into Celsius followed a Wall Street Journal report from Thursday that two firms that habacked the crypto lending platform during a November 2021 funding round did not plan to provide additional funds due to the potential risks, citing people with knowledge of the situation. WestCap Group and Canadian pension fund Caisse de dépôt et placement du Québec led a $750 million Series B funding round for Celsius, which helped the platform reach a $3.5 billion valuation.
With the crypto market experiencing significant volatility in June, Celsius has reportedly onboarded attorneys to find different solutions to the current financial challenges faced by the company. CEO Alex Mashinsky took to Twitter on Wednesday — breaking a three-day social media silence — to say that the Celsius team was working “non-stop” to handle consumer considerations.
@CelsiusNetwork crew is working continuous. We’re targeted in your considerations and grateful to have heard from so many. To see you come collectively is a transparent signal our neighborhood is the strongest on the planet. This is a tough second; your persistence and help imply the world to us.
— Alex Mashinsky (@Mashinsky) June 15, 2022
The Texas State Securities Board additionally took motion in opposition to Celsius in September 2021, initially scheduling a listening to associated to allegations that the community had provided and bought securities within the state that weren’t registered or permitted, along with the platform not registering as a supplier below Texas’ Securities Act. The New Jersey Bureau of Securities issued a stop and desist order in opposition to Celsius for comparable alleged violations of the state’s securities legal guidelines.
Related: SEC chair warns about ‘too good to be true’ returns amid market downturn
Major cryptocurrencies together with Bitcoin (BTC) and Ether (ETH) have dipped near $20,000 and $1,000, respectively, within the final seven days amid excessive market volatility. Possibly in response to those losses, many crypto exchanges have introduced employees cuts between 5%–20%, together with Coinbase, Gemini and Crypto.com.
Cointelegraph reached out to Celsius Network, however didn’t obtain a response on the time of publication.