Following recent accusations of bonds trading leveled at crypto startup BlockFi, state regulators in New Jersey and Texas have targeted the Celsius Network.
The Texas Treasury has summoned Celsius Network representatives to a lawsuit followed by a ceasefire order. The reason for this was the accusation of trading unregistered bonds within the offer of digital currency products that generate interest income. The hearing on the case will take place in Texas on February 14, 2022 in a standard or online format. If a decision is made to wind up the Celsius business in the state, then the divisions of Celsius Lending, as well as Celsius US Holding, will be forced to close together with the main enterprise.
The firm's crypto holdings have grown 2,300% toward early summer 2020, according to the state regulator. Then representatives of Celsius announced the storage of crypto assets for $1B. As of September 3, 2021, the firm owns over $24B, making it one of the largest players in the DeFi industry. In Texas, the firm has over $340 million in assets raised from 9,000 Texans as of June 9, 2021.
The New Jersey Securities Bureau soon joined the Texas regulator and said the Celsius Network was contributing unregistered bonds to consumers for about $14 billion. The state attorney general declared that crypto businesses are now under the scrutiny of American regulators, and if they sell securities, they must make sure that they do not violate the laws of the states in which they operate.
After the publication of the accusations, Celsius CEO Alex Mashinsky announced the company's readiness to cooperate with regulators, specifying that the team would be happy to “tell them what it is doing and teach them to understand the products offered by Celsius”. In addition, during the Ask Me About Anything session, he also told members that he was “literally pouring money on them,” comparing Celsius's $50 referral bonus for new customers to marketing companies BlockFi and FTX.
It does not seem that the head of the company was greatly disturbed by the claims from the regulators, so he is unlikely to avoid the opportunity to conduct a dialogue with them, albeit in court.
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