By
Steve Muchoki
April 19th, 2024
Celsius Network faces investigation from regulators across five states over its recent decision to suspend customer account withdrawals.
Following its decision to suspend withdrawals, the Celsius Network is now facing an investigation from state securities regulators. According to Texas State Securities Board enforcement director Joseph Rotunda, officials have met and have decided on the probe and will consider it a “priority”. Rotunda also said:
“I am very concerned that clients – including many retail investors – may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences.”
Rotunda said the problem with Celsius and its customer withdrawals first came to his attention on Sunday via the company’s blog post and Twitter.
Celsius Network Is Cooperating with Ongoing Investigation Proceedings
In addition, Rotunda also stated that Celsius is already cooperating with the regulators. However, the investigation is still in its initial stages. Furthermore, the Texas State Securities Board enforcement director added that the Securities and Exchange Commission (SEC) was communicating with Celsius on the matter.
Reuters contacted parties for comments on the ongoing investigation. Some declined, while others had not responded as of press time. On the other hand, the Kentucky Department of Financial Institutions said responding to an ongoing investigation is against its policy.
Celsius Account Freeze
A few days ago, Celsius announced that it was freezing activities such as swaps, transfers, and withdrawals due to “extreme market conditions”. This comes amid the sustained broader crypto sell-off, with the crypto lender saying it decided to “stabilize liquidity and operations”. Furthermore, Celsius attempted to justify the suspension, referring to it as “the most responsible action we can take to protect our community.”
Following the suspension of withdrawals, Celsius also appointed banking giant Citigroup, and a law firm to advise on possible solutions. Furthermore, the crypto loan company also received an offer from crypto platform Nexo to acquire Celsius’ remaining qualifying crypto assets.
Due to the situation, Celsius may face a class-action lawsuit led by BitBoy Crypto. However, the suit might have to wait until Celsius declares files for bankruptcy. BitBoy Crypto founder Ben Armstrong said that Celsius would not allow him to withdraw money from the platform. Armstrong also added that in order for him to access his funds, he had to first send more money to Celsius. A tweet by the popular Youtuber read:
“[Our account rep] told us we had enough money in our account to pay off a loan. But we can’t use money in our account. We HAVE TO SEND CELSIUS MORE MONEY TO PAY IT OFF.”
“Imagine an insolvent company that you can’t withdraw your money from ASKING YOU TO SEND THEM MORE MONEY,” added Armstrong.
Last September, Kentucky, New Jersey, and Texas regulators issued a cease-and-desist order against Celsius. According to the regulators, Celsius’ interest-bearing products should be registered as a security.