Cryptocurrency lender Celsius Network on Sunday opted to freeze customer withdrawals and other transactions, leaving its nearly 2 million users without access to their funds. Now, safety boards in Alabama, Kentucky, New Jersey, Texas and Washington have opened investigations into Celsius. The SEC has also approached the company.
This isn’t the first time cryptocurrency lending companies have run into trouble with state and federal officials. Last year, several states ordered Celsius to stop selling so-called high-yielding cryptocurrency products, which many investors have warned are risky because they don’t offer the same FDIC protections as banks if institutions fail. Currently, residents of New York and Washington states cannot purchase assets on Celsius.
Officials with the Texas Securities Commission began discussing Celsius’ sudden freeze on consumer assets early Monday morning, the agency’s enforcement director, Joseph Rotunda, told Reuters. “I am very concerned that clients – including many retail investors – may need immediate access to their assets, but not be able to withdraw them from their accounts. The inability to access their investments could have significant financial consequences,” he said.
In a memo to users explaining Sunday’s decision, Celsius cited “extreme market conditions” as the main motivation. Freezes include transfers, withdrawals and swaps between accounts. “We are taking this action today to allow Celsius to better meet its withdrawal obligations over a period of time,” the company wrote.
Over the weekend, users responded via social media, often sharing the negative impact the freeze had on their own finances. One user claimed on Twitter that the platform had liquidated a loan worth over $27,000 because they were unable to get funds to pay or post collateral. “This is not why I canceled banking,” they wrote.