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United States

State Securities Regulators Investigating Celsius Accounts Freeze (reuters.com) 48

Posted by msmash from the time-to-face-music dept.
State securities regulators in Alabama, Kentucky, New Jersey, Texas and Washington are investigating crypto lender Celsius Network's decision this week to suspend customer redemptions, Joseph Rotunda, enforcement director at the Texas State Securities Board told Reuters on Thursday. From a report: Officials met and began investigating the matter first thing Monday morning, Rotunda said, adding he considered the probe to be a "priority." Celsius said that due to extreme market conditions, it was pausing withdrawals, swaps and transfers between accounts. The company said that doing so would put it "in a better position to honor, over time, its withdrawal obligations."

"I am very concerned that clients -- including many retail investors -- may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences," he said. Alabama Securities Commission Director Joseph Borg also told Reuters that Alabama, Texas, New Jersey and Kentucky securities regulators were probing the matter. Celsius has been responsive to questions from the regulators, but that the investigation is in the initial stages, he said.
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State Securities Regulators Investigating Celsius Accounts Freeze More

State Securities Regulators Investigating Celsius Accounts Freeze

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  • Law is black and white. Either you are , or you are not. Else you are Chapter 24 or similar. Regulators have a new problem - the public are about to loose faith in them. Now any entity is a rough patch - may rewrite the rule book seems understandable - but the world is littered by insider and preferential founder / creditor treatment. It is good when fools loose money.

    • Re:Regulators are too late to the party (Score:5, Insightful)

      by Anonymous Coward on Friday June 17, 2022 @12:06AM (#62626824)
      Many claim they are in Crypto because regulators can't fuck with it, now everyone is screaming for the regulators to save them. You made your bed, now sleep in it.
      • Celcius doing something similar to what many trading companies did during the GME spike, only this seems much more extreme, since it's across their whole platform and not limited to specific instruments. They are probably taking measures beyond whatever the agreement was when customer funds were accepted for trading, so there could be legal ramifications. As far as being "unregulated"- it would be surprising if the SEC hadn't created some sort of customer protection yet for crypto traders, as there have alr

        • There is volatility in both cases, so they have that in common.

          Celsius is refusing to give account holders their money.

          During very unusual volatility events like a couple days of GME, brokers decided to NOT offer to sell you stock that had gone from $325 to $60 in a couple days - to not TAKE your money. There's a significant distinction between:

          A) I won't take your money (and sell you XYZ)
          B) I have your money and won't give it back

          In that sense, the two are opposites.

          • Robin Hood limited GME transactions the day after it peaked at over $420, apparently to protect their solvency as a broker and possibly in an attempt to protect some short holders, so it really is very similar since they are "self regulating" by limiting customer transactions in order to protect themselves. I agree with you that the current situation is much worse because they're limiting withdrawals.

          • Re: (Score:3)

            by mysidia ( 191772 )

            There is volatility in both cases, so they have that in common.
            Celsius is refusing to give account holders their money... During very unusual volatility events like a couple days of GME, brokers decided

            Celsius aren't really a broker though, they are the fund.. It's not "their money" the transfers into Celsius Earn become Celsius' money you are joining a "Lending Stake Pool", and in turn Celsius has an unsecured debt obligation to their customer in your share of the pool. That's not like people's "Cash wai

          • Celsius is refusing to give account holders their money.

            There is no money. It's crypto. The real money has been spent.

            Welcome to the end stage of crypto, when the idiots and their money are officially parted.

            They can investigate all they want, the money has disappeared, never to return. All that is left is the grift.

            • All that is left is the grift.

              At least its immutably documented :)

            • Re: (Score:2)

              by mysidia ( 191772 )

              They can investigate all they want, the money has disappeared

              I see... well, they should be able to eventually return the Crypto to their customers / allow their customers to withdraw their crypto then, no problem, right?

              • They can investigate all they want, the money has disappeared

                I see... well, they should be able to eventually return the Crypto to their customers / allow their customers to withdraw their crypto then, no problem, right?

                Isn't that a strange thing? If crypto were real, it would seem that exchanging one's crypto for more crypto would be the winning move.

                • Re: (Score:2)

                  by mysidia ( 191772 )

                  Isn't that a strange thing? If crypto were real, it would seem that exchanging one's crypto for more

                  Oh.. Crypto is real.. Bitcoin's value is not zero, and it's not fake just bc it is intangible. US Dollars in the banking system are Intangible too, after all. All we've really seen so far is a multiple drop in market price caused by speculators failing to meet margin calls After large funds responded to expectation of rising interest rates.

                  It could very go well down to $10K too just like it was a

                  • Isn't that a strange thing? If crypto were real, it would seem that exchanging one's crypto for more

                    Oh.. Crypto is real.. Bitcoin's value is not zero, and it's not fake just bc it is intangible.

                    I'm selling OlsocCoin. One OlsocCoin is the GNP of the entire world. Any takers?

                    • Re: (Score:2)

                      by mysidia ( 191772 )

                      I'm selling OlsocCoin. One OlsocCoin is the GNP of the entire world. Any takers?

                      Nah.. but i've got something better to offer you. It's called a Brooklyn Bridge Fractional NFT (F-NFT) where you get to own a part of the bridge, what do you think?

                    • I'm selling OlsocCoin. One OlsocCoin is the GNP of the entire world. Any takers?

                      Nah.. but i've got something better to offer you. It's called a Brooklyn Bridge Fractional NFT (F-NFT) where you get to own a part of the bridge, what do you think?

                      Let's form a company!

        • Re: (Score:1)

          by Anonymous Coward
          The differences are quite significant, the only reason the SEC is even looking is because it is a company and they are potentially trading insolvent (illegal). The terms of the agreement you sign by putting your money into Celsius allow them to do exactly what they have done and potentially you have absolutely zero comeback on them. I would not expect much from the SEC except either declaring them bankrupt or saying Celsius are operating within the terms of the contracted agreements.

        • Celsius has been sketch for quite some time.

          Upper Echelon Gaming has done a series on them...and they wreak of an organization that any sane person wouldn't do business with.

          The first video on the topic got made private, so I can't link to it.

          He got a Cease and Desist from Celsius for calling them out:
          https://www.youtube.com/watch?... [youtube.com]

          The writing on the wall:
          https://www.youtube.com/watch?... [youtube.com]

          The most recent one I haven't seen yet:
          https://www.youtube.com/watch?... [youtube.com]

          TL;DW: The GME spike was a bunch of folks takin

      • Re: (Score:3)

        by gweihir ( 88907 )

        It is not the role of regulators to "save" anybody. It is the role of regulators to tell regulated businesses what they can and cannot do. And, if applicable, to find a regulated business violated the law or the business violated regulations. The can also order businesses to stop doing things or to start doing things, including ordering a stop of business and the like. The only thing the business can do against this is to sue, with very little chances of success.

        • well exactly, yet that doesn't stop people from screaming for the regulators to save them.

          • Re: (Score:2)

            by gweihir ( 88907 )

            Well, yes. But that will not happen. They did it to themselves and they now will have to deal with the consequences. You know, like adults.

    • Law is black and white.

      Securities law is certainly known for its clarity.

    • Re: (Score:2)

      by gweihir ( 88907 )

      Hahaha, no. Regulators can come in at any time the chose, including long after the fact. If they can prove whatever happened falls under regulation, they can do a lot, including forbidding continued business or handing things over to prosecution.

    • Comment removed based on user account deletion
      • Bitcoin falls below 20K. Well, well, they might be waiting a long time to get something back. Those who borrowed money to 'invest' deserve to get whats coming. Now, not so for Chinese whose local bank folded, and where deposit insurance also evaporated - on top of branches closing their doors shut for in person withdrawals. Now the regulators will be blamed anyway, and those burnt - may change their voting intentions going forward. Regulators will now need to document what went wrong - and 99.9% of readers

  • Lame (Score:4, Funny)

    by backslashdot ( 95548 ) on Friday June 17, 2022 @12:33AM (#62626868)

    Not a single temperature-related joke? You guys suck.

  • Cryptocurrency is a scam... (Score:2, Interesting)

    by Anonymous Coward

    Crypto is the world's most obvious scam and the party is over, you fucking idiots.

    • Crypto is the world's most obvious scam and the party is over, you fucking idiots.

      Almost word for word [cnn.com] what Bill Gates said. You're not posting anonymously, are you Bill?

  • ... it was pausing withdrawals ...

    Banks and Hedge funds do this too: Why is this self-described 'investment fund' not allowed to do it?

    ... investment may result in significant financial consequences ...

    If selling the collateral asset (eg. your house mortgage) doesn't cover its purchase price, the investors will be losing money: That's a "financial consequence" too. Worse, banks tend to pay-in-full to the early quitters meaning there's no money for the madding crowd: The result is insolvency AKA bankruptcy. That's a big "financial consequence".

    ... retail investors -- may need to immediately access their assets ...

    Sounds like a "corporations have more rights" argument, alt

    • ... it was pausing withdrawals ...

      Banks and Hedge funds do this too: Why is this self-described 'investment fund' not allowed to do it?

      It all depends on the agreements the customers signed up for when they gave the business their money.

      The investigation will be looking into the terms of that agreement. And whether the conditions were met or not.

      I'm just waiting for all the tears from the "I got into crypto to get away from evil regulations" people, crying "Why won't the regulators get my money back!"

  • Any institution which suddenly blocks withdrawals of assets, credits, coins, points, etc. which you put in and/or "earned" instantly raises Ponzi scheme warning flags for me. Why pause withdrawals if you have the crypto to cover it? The only reason would be there is not enough for everyone to pull out all at once, which to me sounds like a strong indication of a Ponzi scheme.

    Note that the above comment is purely about ability to withdraw crypto in your own account. I am not talking about the ability for c

    • Re: (Score:2)

      by gweihir ( 88907 )

      Well, yes. But you find this out _now_?

    • Any institution which suddenly blocks withdrawals of assets, credits, coins, points, etc. which you put in and/or "earned" instantly raises Ponzi scheme warning flags for me.

      Do you also think a bank has enough cash on hand in case everyone wanted theirs back at the same time? They don't.

      Why pause withdrawals if you have the crypto to cover it? The only reason would be there is not enough for everyone to pull out all at once, which to me sounds like a strong indication of a Ponzi scheme.

      Different assets have different liquidity. Banks have some cash, some things they can quickly sell for cash, and things that will take more time to sell for cash.
      There are legitimate reasons for things working the way they do.

      But you are right, crypto is 100% ponzi / scam / greater fool / etc.

    • These red flags have been there for many years:

      * Reward halving. This means people coming in later get less rewards, so it effectively funnels value to earlier comers.
      * Only a certain number of "train tickets". The BTC transaction mechanism is limited to how much blockchain usage it can do.
      * The blockchain can't really be authortatively pruned. You have to either parse the 400+ gigs of it, or trust someone else's blockchain copy to make sure you are not double-spent. This also means that some transac

    • Re: (Score:2)

      by mysidia ( 191772 )

      Why pause withdrawals if you have the crypto to cover it? The only reason would be there is not enough for everyone to pull out all at once

      Another reason would be the Crypto is locked up because other people are borrowing it, and not enough remains uninvested to handle the volume of withdrawals expected to occur.

      The customer balances are explicitly deposited into a "Lending stake pool". Obviously Celsius need to retain a working reserve of some type to meet the needs of some customers who want to withd

  • So these people may have traded securities without meaning to. That is really bad luck! Somebody may even go to prison! Hehehehehe....

  • You Know You're In Deep Shit... (Score:5, Funny)

    by splutty ( 43475 ) on Friday June 17, 2022 @06:46AM (#62627264)

    You know you're in deep shit when the regulators in both Texas and Washington are looking at your shit..

  • everything old is new again (Score:3)

    by jbmartin6 ( 1232050 ) on Friday June 17, 2022 @07:51AM (#62627368)
    It sounds like they managed to re-invent fractional reserve banking and are just now finding out what a 'bank run' is. You could also read it to say they were running a Ponzi scheme.

  • There are trading limits in all the big stock markets, that if triggered, cause trading to end for the day.

    This looks pretty similar?

    Google "bank holiday" for more examples at the federal level.

    Not that I agree with what they're doing, I just don't like double-standards. "You can't do that. Only I am allowed to do that!"

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