In spite of repeated efforts to get crypto interest-related account providers comply with California law, the Department of Financial Protection and Innovation (DFPI) in California has had no success to date in doing so. A “desist and refrain” order was issued by the DFPI for the cryptocurrency lending platform Celsius, following similar orders for the termination of services for Voyager and BlockFi inside the jurisdiction.
To Cease All Securities Offerings Immediately
The decision simply requires the crypto lending company, which is in the process of bankruptcy, to cease all future marketing and trading of the securities inside the state of California. On August 8th, the order was published in the official gazette.
It claims that Celsius Network and its CEO, Alex Mashinsky, made false or misleading statements in advertising the accounts, particularly in regards to the risks associated with digital asset deposits. According to the Department, one of the risks that isn’t being discussed is the possibility that the digital assets won’t be within the grasp of the third-party custody-related services.
There is also the possibility that the platform does not have sufficient funds on hand to immediately satisfy the withdrawal demands made by its users. Then, there’s always a chance that the lenders won’t be able to give back Celsius’s collateral when they say they will. The venue is being accused of breaking California law by offering digital assets without being registered as a securities provider.
Companies offering such securities inside the state’s borders are required to get a license from the DFPI. Earlier this year, in July, the DFPI issued two separate cease-and-desist orders, one against Voyager and another against BlockFi. On July 6th, Voyager, a crypto exchange associated with the failed hedge firm Three Arrows Capital (3AC), filed for Chapter 11 bankruptcy protection.
Legal Experts Support Celsius’s Position
Celsius has ceased all withdrawals and incentives for all of its customers since the 13th of June, as well as any margin calls, liquidations, and the issue of special loans. The venue’s attorneys argued at the venue’s first bankruptcy court that the venue has the right to rehypothecate, pledge, sell, and utilize those tokens because the customers transferred title to the tokens to the firm per the ToS.