Texas, New Jersey, Alabama and other US states have launched an investigation into Celsius Network
A number of states in the United States, including Texas and Alabama, are looking into the decision made by Celsius Network to suspend client withdrawals.
The move by Celsius Network (CEL) to block consumer withdrawals is being looked at by several US jurisdictions, including the states of Texas, New Jersey, and Alabama.
The cryptocurrency lending platform said in a blog post that it would temporarily halt withdrawals and its swap and transfer products on June 12, citing “extreme market circumstances” as the reason for the decision.
Celsius said that doing this would put them “in a better position to honor, over time, its withdrawal obligations.”
Massive market sell-offs were brought on by rumors that the corporation was about to go bankrupt, which quickly circulated over social media.
Joseph Borg, the director of the Alabama Securities Commission, confirmed that his agency, along with those of Texas, New Jersey, and Kentucky, is conducting an investigation into the situation.
He stated that although the probe is still in its early stages, Celsius has responded to the inspectors’ inquiries.
Borg continued by saying that the United States Securities and Exchange Commission has also been in touch with Celsius.
Operating in a grey area
In September, Celsius was issued a stop and desist order by authorities in the states of Kentucky, New Jersey, and Texas.
The officials said that Celsius’s interest-bearing products need to be registered as securities.
In February, the SEC and those same state authorities levied a fine of $100 million on BlockFi for the company’s failure to register its cryptocurrency lending product.
Celsius operates in a manner that is comparable to that of a bank in that it collects cryptocurrency deposits from retail clients and invests those funds in a market that is similar to the wholesale cryptocurrency market.
These investments may be made in “decentralized finance,” often known as “Defi,” which refers to websites that utilize blockchain technology to provide services such as loans and insurance outside the conventional financial sector.
Earlier this month, Celsius pumped over 500% within 5 minutes amongst its liquidity issues.
The company also hired restructuring lawyers to help them with their liquidity problems earlier this week.
Celsius users share harrowing posts as withdrawal freeze extends to fourth day
Users are left in limbo as Celsius CEO posts vague update on what is happening at the lending and borrowing platform.
Four days since Celsius Network paused withdrawals, swaps, and transfers between accounts, there remains no indication of reinstatement.
On Wednesday, it emerged the firm had hired a firm of lawyers to advise on its situation, further adding to concerns that users have lost their money.
As the situation develops, users have posted accounts of how they have been affected, and much like the stories of Terra victims, it makes for distressing reading.
The accounts of Celsius users
On Wednesday, an update from Celsius Network CEO Alex Mashinsky said the “team is working non-stop” to resolve the situation.
He added that the company is focused on users’ concerns and calls for patience and support during this time.
At writing, the tweet had garnered over 1,100 replies, many of which were from anxious users desperate for more concrete news on what is happening at the lending and borrowing platform.
One user said he is in disbelief over being locked out of accessing his 28 ETH life savings.
With that, he feels suicidal and isolated due to the shame of speaking to his family about what happened.
Another user said he couldn’t sleep from worrying about the years of hard work that built his 45 ETH balance with the platform.
He prays that the situation will work out.
Numerous replies called Celsius to halt rewards, lessen liquidity obligations, and reinstate withdrawals.
But, as one Redditor explains, doing this will likely trigger “an almighty run,” leaving the platform asset-less.
“It’s a tough situation now. If / when they open withdrawals again, there’s going to be an almighty run on the assets there, rendering the platform useless (it needs assets to operate).
The owners will know this.”
What went wrong?
Analyzing the situation, the founder of the Crypto Pragmatist newsletter,
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