Securities regulators from 5 states probing into Celsius halt of withdrawals 

• According to Alabama Securities Commission Director Joseph Borg, securities regulators in Alabama, Texas, New Jersey, Washington, and Kentucky are in the initial stage of the investigations.
• On Wednesday, Celsius CEO stated on Twitter that the company has taken note of the concerns of its customers.

Crypto lending company Celsius Network recently informed its 1.7 million customers that it is halting all withdrawals, swaps, and transfers between accounts. The reason was reportedly due to extreme market conditions and stated that the decision is in the interest of its community. In response, state securities regulators in Alabama, Kentucky, New Jersey, Texas, and Washington have commenced investigation into the decision according to Joseph Rotunda, enforcement director at the Texas State Securities Board. He disclosed that officials started the official investigation on Monday, and considered it a priority.

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.

This was also confirmed by Alabama Securities Commission Director Joseph Borg. According to him, securities regulators in Alabama, Texas, New Jersey, and Kentucky are in the initial stage of the investigations and admitted that Celsius has been very responsive so far. 

Celsius lures customers with huge returns

The decision to freeze the withdrawal of its customers’ accounts was initially spotted by Rotunda and his team on the company’s blog post. Celsius’ contact with authorities dates back to September when regulators in Kentucky, New Jersey, and Texas imposed a cease and desist order. Authorities asked the company to register its interest-bearing products as securities. BlockFi also got a fine of $100 million in February from regulators for failing to register its lending product. 

On Wednesday, Celsius CEO Alex Mashinsky said on Twitter that the company has taken note of the concerns of its customers.

Celsius Network team is working non-stop. We’re focused on your concerns and thankful to have heard from so many. To see you come together is a clear sign our community is the strongest in the world. This is a difficult moment; your patience and support mean the world to us.

The operation of the crypto lending company is just like the banks; it gathers deposits from retail customers and invests them in the equivalent crypto markets like the Decentralised Finance (DeFi) sites. Retail customers are then offered huge returns such as 18.6 percent annually. It is said that the promise of huge returns influenced a lot of investors to deposit their assets on the platform. 

According to Mashinsky, Celsius had $25 billion in assets in October. The assets are now worth around $11 billion as of last month. The company’s wholesale crypto investment is believed to have been affected by the general crypto market pullback following the Terra crash, which might have made it difficult to meet redemptions from customers.