The Texas State Securities Board has requested a hearing to target a cease and desist order against crypto lending firm Celsius Network for failing to offer securities licensed at the state or federal level, while the New Jersey Bureau of Securities has ordered the platform to stop offering and selling interest-earning cryptocurrency products.
According to a September 17 filing, the Texas Securities Commission will hold a hearing on accusations that Celsius Network is offering and selling securities in Texas that are not registered or allowed, as well as failing to register as a dealer under the state's Securities Act.
If the judge rules that the platform's offerings constituted unlicensed securities, Celsius Network may face a cease and desist order.
The New Jersey Bureau of Securities announced the same day that it had issued a cease and desist order against Celsius for allegedly “funding its cryptocurrency lending operations and proprietary trading at least in part through the sale of unregistered securities in violation of the New Jersey Securities Law.”
According to the state regulator, the platform generated around $14 billion in revenue from such sales.
On February 14, the Texas hearing will take place either online or in person. If the judge issues a cease and desist order, Celsius Network and its affiliates Celsius network Limited, Celsius US Holding, and Celsius Lending will almost certainly be required to stop offering cryptocurrency services in Texas without first registering with the state's securities board or the United States Securities and Exchange Commission.
According to the Texas filing, Celsius has more than $24 billion in digital assets as of September 3, making it one of the largest decentralized financial companies.
Since June 2020, when it declared $1 billion in digital assets, its holdings had increased by more than 2300%.
As of June 9, Celsius Network managed over $334 million in assets from over 9,000 households and small companies in Texas.
On May 14, Texas State Securities Board’s Enforcement Division informed Celsius that it may have not been following the State Securities Act.
It claimed in a September 17 filing that the platform’s Earn Interest-Bearing Accounts violated Section 4.A of the Securities Act because they were “ investment contracts, notes or evidence of indebtedness regulated as securities.”
The charges leveled against Celsius are identical to those leveled against crypto lending company BlockFi by both state authorities as well as their counterpart in Alabama in July.
On Oct. 13, the business will appear in a virtual court in Texas to consider issuing a cease and desist order for allegedly unlawfully financing its crypto lending activities and proprietary trading through the sale of unregistered securities.
The cease and desist injunction issued against BlockFi in New Jersey prevents the platform from onboarding new interest account clients in the state.
Celsius users appeared to be disappointed with regulators cracking down on the loan platform, but claimed the decision might be due to officials seeking to spell out clearer regulations for firms entering the area.
"Celsius CEO Alex Mashinsky has often said that it was they who invented the notion of paying yield on crypto and, as a result, have surely poured over the numerous methods in which they can offer for their clients," Redditor MaintenanceGold6992 remarked.
This seems like a load of nonsense, most likely to make it appear as though the states/government aren't only after Coinbase/BlockFi. Celsius will be able to endure the storm."