The California Consumer Protection Agency DFPI continues to take a hard hand against crypto savings platforms. After BlockFi and Voyager were already asked to stop their business operations in California, Celsius is now being targeted by the authority.
In the official cease-and-desist request, the Consumer Financial Protection Bureau argues that the Celsius Network and its managing director Alex Mashinsky are engaged in the unlawful sale of unauthorized securities in the form of crypto savings accounts. Among other things, the DFPI complains that the savings platform has not sufficiently communicated the associated risks to consumers.
Thus, Celsius would earn from the fact that the crypto funds invested by users are lent to third parties, which, however, is fraught with great risks, because these third parties could lose funds or not repay loans on time, which in turn could lead to liquidity bottlenecks at Celsius.
These objections have now come true to the chagrin of consumers, because in the wake of the crisis on the crypto market, the savings platform has gone wrong and had to file for bankruptcy. Previously, a withdrawal freeze was already imposed, which means that crypto investors can no longer access their invested funds at the moment.
In July 2022, the Consumer Financial Protection Bureau had already issued two similar cease-and-desist requests to BlockFi and Voyager. Voyager Digital, which is associated with the failed crypto hedge fund Three Arrows Capital (3AC), had to go into bankruptcy on July 6.
