elsius has now been issued a cease and desist order by California's Department of Financial Protection and Innovation (DFPI). As a result, the bankrupt crypto lender will no longer be able to sell or market securities in the state of California.

The news comes less than a month after the DFPI issued two cease and desist orders to other crypto lending platforms - BlockFi and Voyager - that had been hit by the contagion.

DEPI's Complaint

Authorities claim that the "Earn Rewards" accounts offered and sold by Celsius are securities, despite the fact that the department issued no permit to authorize the activities. The company and its CEO, Alexander Mashinsky, were also accused by the DEPI of failing to disclose material aspects of its business and earn rewards fully.

The August 8th order alleged that Mashinsky made "materially" false statements. It was also noted that the executive continued to tout that Earn Rewards investors would be able to timely withdraw their investments and avoid losses on multiple occasions prior to the company's suspension of customer wallets on June 12th.

Celsius also provided accounts that allowed users to earn interest on their deposited digital assets, according to the agency. It did not, however, qualify those accounts as securities as required by California law - Corporations Code Section 25110.

The company halted customer withdrawals from interest accounts on June 25th, after which it filed for Chapter 11 bankruptcy a few weeks later.

Increasing Legal Issues

Several state agencies, including California's DEPI, are currently investigating the platform. It has also been accused of making unregistered security offerings to retail investors, according to Vermont's Department of Financial Regulation (DFR). The regulators also claimed that the company is "deeply insolvent," with no assets or liquidity to meet its obligations to customers and other creditors.

Former Celsius executives made shocking claims about the company's internal issues, including poor risk management, disorganization, and market manipulation.

Blockchain data also showed that Mashinsky's wallet address may have sold some of its CEL token holdings, adding to Celsius' financial difficulties.


Chayanika Deka

Aug 11, 2022
Crypto News

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