DFPI Takes Action Against Crypto Giants
The Department of Financial Protection and Innovation (DFPI) in California has been busy, slapping down cease-and-desist orders more frequently than a cat on a keyboard. Recently, they turned their attention to Celsius Network, issuing a desist and refrain order which basically tells the crypto lending platform to take a timeout from selling and marketing securities in the state.
What’s the Deal with Celsius?
Celsius, which is currently embroiled in bankruptcy proceedings, is now tasked with halting its operations, according to the DFPI. The order cites that CEO Alex Mashinsky and the company made notable misrepresentations about the safety of their crypto interest accounts. Spoiler alert: They downplayed the potential risks associated with these digital investments!
The Risks Nobody Mentioned
According to the DFPI, the risks that were swept under the rug include:
- Possibility of losing access to digital assets due to third-party custody services.
- Inability to return collateral on time, which is always a great feeling when you’re expecting a refund.
- If too many users suddenly want their money back, cash flow issues could leave Celsius scrambling.
This isn’t exactly a cozy blanket of security, is it?
The Legal Fine Print
Celsius is also being accused of not properly categorizing their digital offerings as securities according to California’s Corporations Code Section 25110. To stay on the right side of the law, companies want to sell these securities only if they’ve got a shiny DFPI permit in hand. No permit? No party!
History Repeating Itself
It seems like the DFPI has a knack for getting involve in crypto debacles; just a month earlier, similar orders were given to BlockFi and Voyager. Locking arms with an infamous hedge fund? Voyager also filed for Chapter 11 bankruptcy, leaving its investors high and dry.
Celsius: A Yikes Moment
The drama unfolded when Celsius paused user rewards and withdrawals on June 13. Rumor has it legal representatives argued that Celsius could do pretty much anything with users’ coins, thanks to the fine print in the terms of service. It’s like giving a friend a loan with a vaguely worded contract—definitely not a situation anyone wants to be in!
In summary, the DFPI is keeping a close eye on any crypto shenanigans, and Celsius just happens to be in the limelight this time. Who knows what’s next? Maybe the next crypto company to face the music will consider a thorough review of their operations before making headlines for all the wrong reasons.
