Breaking: California is Investigating Crypto Lending Firms to Protect Residents Interests
- The constitution of unregistered securities by major crypto lending firms has triggered the department’s decision to make the call for a nationwide investigation on crypto lending companies.
The California Department of Financial Protection and Innovation (DFPI) is taking measures to investigate multiple crypto lending firms within the nation, a press release from the department revealed.
The investigation is focused on companies that offer interest-bearing crypto asset accounts to customers. Considering the recent decision to halt withdrawal services by reputable crypto lending companies, the department found cases of unregistered securities, hence it fears that users might be at risks they are probably not adequately informed about.
DFPI Encourages Caution Against Crypto Lending Platforms
The recent market crash has critically affected multiple crypto platforms over the past few weeks, with crypto lending platforms experiencing the major hit so far. This has seen a few crypto lending companies at the verge of winding up or being acquired. Meanwhile, many of such platforms have been compelled to suspend withdrawal services while the market slump persists.
Nonetheless, the California Department of Financial Protection and Innovation (DFPI) believes these crypto lending firms may not have adequately informed their customers about the risks they are poised to when they deposit crypto assets to their platforms.
The department claimed it discovered that certain crypto-interest accounts were unregistered securities after actions were taken against the distressed crypto lending firms Voyager Digital and BlockFi. Meanwhile, it is mandatory by law to register every securities.
The department noted that it serves as a measure to ensure that users and investors are provided with all material information they need to properly examine the platforms before venturing into them. This would enable the customers to determine whether to enter into these crypto-interest account arrangements. Hence, they have adequate information about the risks being taken with the deposited funds.
“Consumers are encouraged to exercise extreme caution before responding to any solicitation offering investment or financial services,” DFPI warns.
The constitution of unregistered securities by the aforementioned crypto lending firms has triggered the department’s decision to make the call for a nationwide investigation. This would enable the department to figure out whether other crypto-interest account providers are violating laws under its jurisdiction.
The department further urged users of such platforms within the nation to reach out to the Department for questions or inquiries via its official email or file or formal complaint via the website.
It appears that warnings regarding crypto lending platforms have been long-coming as a report unveiled that the U.S. Senator Elizabeth Warren last month issued a statement to warn users against crypto lending platforms’ claims of double-digit rates. Warren warned that most of them were too good to be true.
Warren statement reads;
“Too many crypto firms have been able to scam customers with too-good-to-be-true claims about safe sky-high returns, leaving ordinary investors holding the bag while insiders make off with their money.”