California Regulator Asks Crypto Lending Firm Celsius To Stop Offering Services in the State - mlmlegit

California Regulator Asks Crypto Lending Firm Celsius To Stop Offering Services in the State

While the Department of Financial Protection and Innovation (DFPI) in California has taken action in the past against crypto interest-related account providers, those businesses have not been able to successfully comply with California law. The DFPI issued a “desist and refrain” order against the cryptocurrency lending platform Celsius, following similar orders against Voyager and BlockFi to cease operations within the jurisdiction.

State of California Demands Celsius Cease Securities Offerings

The order simply stipulates that the crypto lending company, which is currently undergoing the bankruptcy process, must cease all future marketing and trading activities involving the securities in question within the state of California. As of the 8th of August, the order had been published.

It claims that Celsius Network and its CEO, Alex Mashinsky, made misleading statements and omitted material information when advertising the accounts, particularly with respect to the risks associated with deposits of digital assets. The Department claims that one of the risks not otherwise discussed is the possibility that the digital assets will be out of reach of the third-party custody-related services.

There’s also the chance that, in the face of an unexpected influx of withdrawal requests from users, the platform simply doesn’t have enough funds on hand to meet those demands. As a result, there is always the chance that the lenders won’t be able to give back the Celsius collateral when it’s due. The venue is being accused of breaking California law by offering digital assets without being registered as a securities provider.

In order to sell securities within the state’s borders, businesses need to obtain a license from the Department of Financial and Professional Regulation (DFPI). Following one another in July of this year, the DFPI issued a pair of orders to cease and desist that were directed at Voyager and BlockFi. The crypto exchange known as Voyager filed for Chapter 11 bankruptcy on July 6th, following in the footsteps of the failed hedge fund known as Three Arrows Capital (3AC).

Celsius Attorneys Justify Its Position

On June 13th, Celsius stopped allowing all of its customers to withdraw funds or receive rewards, and it has since stopped issuing new exclusive loans, liquidating accounts, and making margin calls. The venue’s attorneys argued in the venue’s first bankruptcy hearing that the venue has the right to rehypothecate, pledge, sell, and use those tokens because the customers transferred title to the tokens to the venue in accordance with the venue’s ToS.

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